T7

T7 practice questions, page 2 of 4, with answer review and explanations.

Question 6

What is the purpose of a balance sheet?

  1. To show sources of funds and the manner in which those funds are employed
  2. To account for changes in cash during the accounting period
  3. To show details of the nature of a company’s operating activities
  4. To reconcile the beginning and ending balances of stockholders’ equity

Question 7

Which of the following describes the change in the net defined benefit liability (asset) during the period due to passage of time?

  1. Past service cost
  2. Current service cost
  3. Net interest on the net defined benefit liability (asset)
  4. Time value of money

Question 8

In defined contribution plans when the contributions are not expected to be settled wholly before twelve months after the end of the reporting period, what must occur?

  1. The employer must assume risk for the plan
  2. Contributions must be discounted
  3. Contributions must not be discounted
  4. The employer must pay a specified amount to the employee

Question 9

Employee benefits provided in exchange for the end of an employee’s employment are considered what kind of benefits?

  1. Short-term benefits
  2. Post-employment benefits
  3. Termination benefits
  4. Long-term benefits

Question 10

What is a constructive obligation?

  1. When a company recognizes the expected cost of profit-sharing and bonus payments
  2. When a company has no realistic alternative but to make payments
  3. When a change in the company’s informal practices would cause unacceptable damage to its relationship with employees
  4. The required accounting entry for liabilities or accrued expenses or cash paid