ch01Student:___________________________________________________________________________1.Theprimaryfunctionoffinancialaccountingistoproviderelevantfinancialinformationtopartiesexternaltobusinessenterprises.TrueFalse2.Accrualaccountingattemptstomeasurerevenuesandexpensesthatoccurredduringaccountingperiodssotheyequalnetoperatingcashflow.TrueFalse3.TheFASBiscurrentlythepublic-sectororganizationresponsibleforsettingaccountingstandardsintheUnitedStates.TrueFalse4.TheFASB'sdueprocessinvitesvariousinterestedpartiestoindicatetheiropinionsaboutwhetherfinancialaccountingstandardsshouldbechanged.TrueFalse5.Accountingforstock-basedcompensationisanareainwhichtheFASBhasreceivedlittlepoliticalinterference.TrueFalse6.ThePublicReformandInvestorProtectionActof2002(Sarbanes-Oxley)changedtheentityresponsibleforsettingauditingstandardsintheUnitedStates.TrueFalse7.Arules basedapproachtostandardsettingstressesprofessionaljudgmentasopposedtofollowingalistofrules.TrueFalse8.Underfederalsecuritieslaws,theSEChastheauthoritytosetaccountingstandardsintheUnitedStates.TrueFalse9.TheprimaryresponsibilityforproperlyapplyingGAAPwhencommunicatingwithinvestorsandcreditorsthroughfinancialstatementslieswithafirm'sauditors.TrueFalse10.AuditorsplayanimportantroleintheresourceallocationprocessbyaddingcredibilitytofinancialStatements.TrueFalse11.Thepurposeoftheconceptualframeworkistoprovideastructureandframeworkforaconsistentset ofGAAP.TrueFalse12.IntheUnitedStatestheconceptualframeworkindicatesGAAPwhenamorespecificaccounting standarddoesnotapply.TrueFalse13.Materialitycanbeaffectedbythedollaramountofanitem,thenatureoftheitem,orboth.TrueFalse14.AccordingtotheFASB'sStatementsofFinancialAccountingConcepts,conservatismisadesiredqualitativecharacteristicofaccountinginformation.TrueFalse15.Equityisaresidualamountrepresentingtheowner'sinterestintheassetsofthebusiness.TrueFalse16.Revenuesareinflowsorotherenhancementsofassetsorsettlementsofliabilitiesfromactivitiesthatconstitutetheentity'songoingoperations.TrueFalse17.Gainsorlossesresult,respectively,fromthedispositionofbusinessassetsforgreaterthan,orlessthan,theirbookvalues.TrueFalse18.Comprehensiveincomeisanothertermfornetincome.TrueFalse19.TheFASB'sconceptualframeworklistsrelevanceandtimelinessasthetwofundamentalqualitativeCharacteristicsofdecisionusefulinformation.TrueFalse20. Themonetaryunitassumptionrequiresthatitemsinfinancialstatementsbemeasuredinaparticularmonetaryunit.TrueFalse21.Theperiodicityassumptionrequiresthatpresentvaluecalculationstakeintoaccountthenumberofcompoundingperiodsineachyear.TrueFalse22.Determiningfairvaluebycalculatingthepresentvalueoffuturecashflowsisalevel1typeofinput.TrueFalse23.TheFASB'sframeworkformeasuringfairvaluedoesn'tchangethesituationsinwhichfairvalueis usedundercurrentGAAP.TrueFalse24.Therevenue/expenseapproachemphasizesdeterminingtheappropriateamountsofrevenueandexpenseineachreportingperiod.TrueFalse25.Theasset/liabilityapproachemphasizesmatchingtodeterminewhatassetsandliabilitiesshouldbereflectedonthebalancesheet.TrueFalse26.InIFRS,theconceptualframeworkindicatesappropriateaccountingwhenamorespecificaccountingstandarddoesnotapply.TrueFalse27.Thefundingofthestandard-settingbodiesthatpromulgateIFRSisasindependentasthatunderlyingU.S.GAAP.TrueFalse28.Externaldecisionmakerswouldnotlookprimarilytofinancialaccountinginformationtoassisttheminmakingdecisionson:A.Grantingcredit.B.Capitalbudgeting.C.Selectingstocks.D.Mergersandacquisitions.29.Corporationsissuetheirsharestotheinvestingpublicinthe:A.OptionaB.OptionbC.OptioncD.Optiond30.Theprimaryfocusforfinancialaccountinginformationistoprovideinformationusefulfor:A.OptionaB.OptionbC.OptioncD.Optiond31.Whichofthefollowinggroupsisnotamongtheexternalusersforwhomfinancialstatementsareprepared?A.Customers.B.Suppliers.C.Employees.D.Alloftheaboveareexternalusersoffinancialstatements.32.Whichofthefollowingisnottrueaboutnetoperatingcashflow?A.Itisthedifferencebetweencashreceiptsandcashdisbursementsfromprovidinggoodsandservices.B.Itisameasureusedinaccrualaccountingandisrecognizedasthebestpredictoroffutureoperatingcashflows.C.Overshortperiods,itmaynotbeindicativeoflong-runcash-generatingability.D.Itiseasytounderstandandallinformationrequiredtomeasureitisfactual.33.Whichofthefollowinggroupsisnotamongfinancialintermediaries?A.Mutualfundmanagers.B.Financialanalysts.C.CPAs.D.Creditratingorganizations.34.Whichofthefollowingwasthefirstprivate-sectorentitythatsetaccountingstandardsintheUnitedStates?A.AccountingPrinciplesBoard.B.CommitteeonAccountingProcedure.C.FinancialAccountingStandardsBoard.D.AICPA.35.Whichofthefollowingdoesnotapplytosecondarymarkets?A.Transactionsareimportanttotheefficientallocationofresourcesinoureconomy.B.Newresourcesareprovidedwhensharesofstockaresoldbythecorporationtotheinitialowners.C.Transactionshelptoestablishmarketpricesforadditionalsharesthatmaybeissuedinthefuture.D Manyinvestorsmightbeunwillingtoprovideresourcestocorporationsifthereisnoavailablemechanismforthefuturesaleoftheirstocksandbondstoothers.36.PoriteCompanyrecognizesrevenueintheperiodinwhichitrecordsanassetfortherelatedaccountreceivable,ratherthanintheperiodinwhichtheaccountreceivableiscollectedincash.Porite's practiceisanexampleof:A.Cashbasisaccounting.B.Accrualaccounting.C.Thematchingprinciple.D.Economicentity.37.Whichofthefollowingisnotapotentialbenefitofaccrualaccounting,comparedtocash-basisaccounting?A.Timeliness.B.Betterreflectingeconomicactivity.C.Periodicity.D.Bettermatchingofrevenuesandexpenses.38.Inarecentannualreport,AppleComputerreportedthefollowinginoneofitsdisclosurenotes:"WarrantyExpense:TheCompanyprovidescurrentlyfortheestimatedcostforproductwarrantiesatthetimetherelatedrevenueisrecognized."ThisnoteexemplifiesApple'suseof:A.Conservatism.B.Thematchingprinciple.C.Realizationprinciple.D.Economicentity.39.GAAPisanabbreviationfor:A.Generallyauthorizedaccountingprocedures.B.Generallyappliedaccountingprocedures.C.Generallyacceptedauditingpractices.D.Generallyacceptedaccountingprinciples.40.TheFASBissuesaccountingstandardsintheformof:A.AccountingResearchBulletins.B.AccountingStandardsUpdates.C.FinancialAccountingStandards.D.FinancialTechnicalBulletins.41.PronouncementsissuedbytheCommitteeonAccountingProcedures:A.Dealtwithspecificaccountingandreportingproblems.B.Werebasedonexposuredraftsandpubliccommentletters.C.OriginatedfromcongressionalstudiesandSECdirectives.D.Weretheoutcomeofresearchstudiesandatheoreticalframework.42.TheFASB'sstandard-settingprocessincludes,inthecorrectorder:A.Exposuredraft,research,discussionpaper,AccountingStandardsUpdate.B.Research,exposuredraft,discussionpaper,AccountingStandardsUpdate.C.Research,discussionpaper,exposuredraft,AccountingStandardsUpdate.D.Discussionpaper,research,exposuredraft,AccountingStandardsUpdate.43.WhichofthefollowingisnotaprovisionofthePublicCompanyAccountingReformandInvestorProtectionActof2002(Sarbanes-Oxley)?TheAct:A.Changedtheentityresponsibleforsettingauditingstandards.B.Increasedcorporateexecutiveresponsibilityforfinancialstatements.C.Limitednonauditservicesthatcanbeperformedbyauditorsforauditclients.D.Changedtheentityresponsibleforsettingaccountingstandards.44.CPAsarelicensedby:A.TheAICPA.B.TheSEC.C.Thefederalgovernment.D.Stategovernments.45.WhichofthefollowinghasthestatutoryauthoritytosetaccountingstandardsintheUnitedStates?A.FASB.B.IRS.C.SEC.D.AICPA.46.WhenaregistrantcompanysubmitsitsannualfilingtotheSEC,ituses:A.Form10-A.B.Form10-K.C.Form10-Q.D.FormS-1.47.ThemostlikelyimportantflawleadingtothedemiseoftheAPBwastheperceivedlackof:A.Confidence.B.Competence.C.Independence.D.Importance.48.Accountingstandardsettinghasbeencharacterizedas:A.Apoliticalprocess.B.Usingthescientificmethod.C.Puredeductivereasoning.D.Pureinductivereasoning.49.TheInternationalAccountingStandardsBoard:A.WasthepredecessortotheIASC.B.CanoverruletheFASBwhentheirpoliciesdisagree.C.Promotestheuseofhigh-quality,understandableglobalaccountingstandards.D.HasitsheadquartersinGeneva.50.WhichofthefollowingisnotaprovisionofthePublicCompanyAccountingReformandInvestorProtectionActof2002?A.Corporateexecutiveaccountability.B.Auditorrotation.C.Retentionofworkpapers.D.AlloftheaboveareprovisionsoftheAct.51.Theprimaryprofessionalorganizationforthoseaccountantsworkingintheindustryisthe:A.AAA.B.AICPA.C.IIA.D.IMA.52.IntheNorwalkAgreement,theFASBandIASBpledgedto:A.CombinetheirorganizationstoformtheBUSYB.B.MakeprogressonspecificMOUprojects.C.Achieveconvergencebytheyear2015.D.Removeexistingdifferencesbetweentheirstandards.53."Condorsement":A.IsatermusedbytheIASBtorefertotheconditionalendorsementprocessusedbytheEUwithrespecttoIFRS.B.DescribesacombinationofconvergenceandendorsementthattheSECsuggestedtheUnitedStatesmightuseinthefuturetoincorporateIFRSintoU.S.GAAP.C.WascoinedbyarepresentativeoftheAICPAtodescribethelengthyconvergenceprocess.D.Hasnothingtodowiththeconvergenceprocess.

54.ThemostpoliticalissueintheFASB'smostrecentdeliberationsandamendmentstoGAAPonbusinesscombinationswas:A.Thenegativeeffectsonsubsequentearningsofamortizinggoodwilliffirmswererequiredtousethepurchasemethodofaccountingforthecombination.B.Thenegativeeffectsonsubsequentearningsofamortizinggoodwilliffirmswererequiredtousethepoolingmethodofaccountingforthecombination.C. Theunrealisticbalancesheetassetsthatwouldbecreatediffirmswererequiredtousethepurchasemethodofaccountingforthecombination.D. Theunrealisticbalancesheetassetsthatwouldbecreatediffirmswererequiredtousethepoolingmethodofaccountingforthecombination.55.TheprimaryhistoricalreasonfortheFASBreversingitspositionswhenpoliticalpressuresoccuris:A.Thecostofgatheringdatawasprohibitive.B.Thedifficultiesinmeasurementweretoogreat.C.Theyhavenoauthorityinsuchsituations.D.TheSECdidnotsupporttheFASBposition.56.Themostrecentexampleofthepoliticalprocessatworkinstandardsettingistheheateddebatethatoccurredontheissueof:A.Pensionplanaccounting.B.Accountingforpostretirementbenefitsotherthanpensions.C.Accountingforbusinesscombinations.D.Accountingforstock-basedcompensation.57.Independentauditorsexpressanopiniononthe:A.Fairnessoffinancialstatements.B.Accuracyoffinancialstatements.C.Soundnessofacompany'sfuture.D.Qualityofacompany'smanagement.58.Thepossibilitythatthecapitalmarkets'focusonperiodicprofitsmaytemptacompany'smanagementtobendorevenbreakaccountingrulestoinflatereportednetincomeisanexampleof:A.Anethicaldilemma.B.Anaccountingtheoryissue.C.Atechnicalaccountingissue.D.Noneoftheaboveiscorrect.59.Oneoftheelementsthatmanybelievedistinguishesaprofessionfromotheroccupationsistheacceptanceofresponsibilitybyitsmembersfortheinterestsofthoseitserves,whichisoftenarticulatedin:A.Itsconceptualframework.B.Itscodeofethics.C.Federallaws.D.Statelaws.60.PhaseAofthenewconceptualframeworkfocuseson:A.Objectiveandqualitativecharacteristics.B.Presentationanddisclosure.C.Recognitionandmeasurement.

D.Elementsoffinancialstatements.61.TheFASB'sconceptualframework'squalitativecharacteristicsofaccountinginformationinclude:A.Historicalcost.B.Realization.C.Faithfulrepresentation.D.Fulldisclosure.62.TheFASB'sconceptualframework'squalitativecharacteristicsofaccountinginformationinclude:A.Fulldisclosure.B.Relevance.C.Goingconcern.D.Historicalcost.63.Theconceptualframework'squalitativecharacteristicofrelevanceincludes:A.Predictivevalue.B.Verifiability.C.Completeness.D.Neutrality.64.Theconceptualframework'squalitativecharacteristicoffaithfulrepresentationincludes:A.Predictivevalue.B.Neutrality.C.Confirmatoryvalue.D.Timeliness.65.SFACNo.5focuseson:A.Objectivesoffinancialreporting.B.Qualitativecharacteristicsofaccountinginformation.C.Recognitionandmeasurementconceptsinaccounting.D.Elementsoffinancialstatements.66.Themainissueinthedebateoveraccountingforemployeestockoptionswas:A.Whichemployeesshouldreceiveoptions.B.Theamountofcompensationexpensethatacompanyshouldrecognize.C.Howmanyoptionsshouldbegrantedtokeyexecutives.D.Thetaxconsequencesofemployeestockoptions.67.Afirm'scomprehensiveincomealways:A.Isthesameasitsnetincome.B.Isgreaterthanitsnetincome.C.Islessthanitsnetincome.D.Couldbegreaterthanorlessthannetincome.68.Netincomeequals:A.Assetsminusliabilities.B.Revenuesminuscostofgoodssold.C.Revenuesminusexpenses.D.Cashreceiptsminuscashpayments.69.Enhancingqualitativecharacteristicsofaccountinginformationincludeeachofthefollowingexcept:A.Timeliness.B.Materiality.C.Comparability.D.Verifiability.70.Theenhancingqualitativecharacteristicofunderstandabilitymeansthatinformationshouldbeunderstoodby:A.Thosewhoareexpertsintheinterpretationoffinancialinformation.B.Thosewhohaveareasonableunderstandingofbusinessandeconomicactivities.C.Financialanalysts.D.CPAs.71.Fundamentalqualitativecharacteristicsofaccountinginformationare:A.Relevanceandcomparability.B.Comparabilityandconsistency.C.Faithfulrepresentationandrelevance.D.Neutralityandconsistency.72.Enhancingqualitativecharacteristicsofaccountinginformationinclude:A.Relevanceandcomparability.B.Comparabilityandtimeliness.C.Understandabilityandrelevance.D.Neutralityandconsistency

73.Gainsare:A.Inflowsfromsellingaproductorservicetoacustomer.B.Increasesinequityresultingfromtransfersofassetstothecompanyfromowners.C.Increasesinequityfromperipheraltransactionsofanentity.D.Noneoftheaboveiscorrect.74.Whenthereisagreementbetweenameasureordescriptionandthephenomenonitpurportstorepresent,informationpossesseswhichcharacteristic?A.Verifiability.B.Predictivevalue.C.Faithfulrepresentation.D.Timeliness.75.SurefeetCorporationchangeditsinventoryvaluationmethod.Whichcharacteristicisjeopardizedbythischange?A.Comparability.B.Representationalfaithfulness.C.Consistency.D.Feedbackvalue.76.Elementsoffinancialstatementsdonotinclude:A.Monetaryunit.B.Investmentsbyowners.C.Comprehensiveincome.D.Losses.77.Theprimaryobjectiveoffinancialaccountinginformationistoprovideusefulinformationto:A.Management.B.Capitalproviders.C.Regulators.D.Noneoftheabove.78.Ofthefollowing,themostimportantobjectiveforfinancialreportingistoprovideinformationusefulfor:A.Makingdecisions.B.Determiningtaxableincome.C.Providingaccountability.D.Increasingfutureprofits.79.Constraintsonqualitativecharacteristicsofaccountinginformationinclude:A.Timeliness.B.Goingconcern.C.Neutrality.D.Cost-effectiveness.80.Accordingtotheconceptualframework,verifiabilityimplies:A.Legalevidence.B.Logic.C.Consensus.D.Legalverdict.81.MaltecCorporationhasstartedplacingitsquarterlyfinancialstatementsonitswebpage,therebyreducingby10daysthetimetogetinformationtoinvestorsandcreditors.Thequalitativeconceptimprovedis:A.Comparability.B.Consistency.C.Timeliness.D.Faithfulrepresentation.82.Recognizingexpectedlossesimmediately,butdeferringexpectedgains,isanexampleof:A.Materiality.B.Conservatism.C.Cost-effectiveness.D.Timeliness.83.Changeinequityfromnon ownersourcesis:A.Comprehensiveincome.B.Revenues.C.Expenses.D.Gainsandlosses.84.WhichofthefollowingStatementsofFinancialAccountingConceptsdefinesthe10elementsoffinancialstatements?A.SFAC4.B.SFAC3.C.SFAC5.D.SFAC685.PrimecoatCorporationcoulddisseminateitsannualfinancialstatementstwodaysearlierifitshiftedsubstantialhumanresourcesfromotheroperationstotheannualreportproject.Managementdecidedthevalueoftheearlierreportwasnotworththeaddedcommitmentofresources.Theconceptdemonstratedis:A.Timeliness.B.Materiality.C.Relevance.D.Cost-effectiveness.86.MegaLoanCompanyhasverystringentcreditrequirementsand,accordingly,hasnegligiblelossesfromuncollectibleaccounts.Thecompany'sindependentaccountantsdidnotprotestwhen,contrarytoGAAP,thecompanyrecordedbaddebtexpenseonlywhenspecificaccountsweredeterminedtobeuncollectible,ratherthanuseanallowanceforuncollectibleaccounts.Theconceptdemonstratedis:A.Comparability.B.Faithfulrepresentation.C.Cost-effectiveness.D.Materiality.87.Fourdifferentcompetentaccountantsindependentlyagreeontheamountandmethodofreportinganeconomicevent.Theconceptdemonstratedis:A.Reliability.B.Comparability.C.Completeness.D.Verifiability.88.Animportantargumentinsupportofhistoricalcostinformationis:A.Relevance.B.Predictivequalityforfuturecashflows.C.Materiality.D.Verifiability.89.Theconceptualframework'srecognitionandmeasurementconceptsrecognizewhichofthefollowingasanassumption,ratherthanaprinciple?A.Goingconcern.B.Historicalcost.C.Fulldisclosure.D.Realization.90.Theassumptionthatintheabsenceofcontraryinformationabusinessentitywillcontinueindefinitelyisthe:A.Periodicityassumption.B.Entityassumption.C.Goingconcernassumption.D.Historicalcostassumption.91.Ifacompanyhasdeclaredbankruptcy,itsfinancialstatementslikelyviolate:A.Thematchingprinciple.B.Therealizationprinciple.C.Thestablemonetaryunitassumption.D.Thegoingconcernassumption.92.Whichofthefollowingistypicallycharacterizedasaprinciple,ratherthananassumption?A.Periodicity.B.Monetaryunit.C.Conservatism.D.Fulldisclosure.93.WhichofthefollowingisnotanidentifiedvaluationtechniqueinGAAPregardingfairvaluemeasurement?A.Costapproach.B.Marketapproach.C.Cost-benefitapproach.D.Incomeapproach.94.Disclosurenotestoacompany'sfinancialstatements:A.Arerelativelyunimportantfactsthatdon'tbelonginthebasicfinancialstatements.B.Documentthesourceoffinancialstatementfacts,likeliteraryfootnotes.C.Areanintegralpartofacompany'sfinancialstatements.D.Areirrelevantfactsthatareimmaterialinamount.95.Acause-and-effectrelationshipisimplicitinthe:A.Realizationprinciple.B.Historicalcostprinciple.C.Matchingprinciple.D.Goingconcernassumption.96.Thefulldisclosureprinciplerequiresabalancebetween:A.Comparabilityandconsistency.B.Relevanceandcost-effectiveness.C.Reliabilityandneutrality.D.Timelinessandpredictivevalue.

97.Therecognitionofwhichofthefollowingexpensesexemplifiestheapplicationofthematchingprinciple?A.President'ssalary.B.Researchanddevelopment.C.Costofgoodssold.D.Advertising.98.Landwasacquiredin2013forafuturebuildingsiteatacostof$40,000.Theassessedvaluationfortaxpurposesis$27,000,aqualifiedappraiserplaceditsvalueat$48,000,andarecentfirmofferforthelandwasforacashpaymentof$46,000.Thelandshouldbereportedinthefinancialstatementsat:A.$40,000.B.$27,000.C.$46,000.D.$48,000.99.Revenueshouldnotberecognizeduntil:A.Theearningsprocessiscompleteandcollectionisreasonablyassured.B.Contractshavebeensignedandpaymenthasbeenreceived.C.Workhasbeenperformedandcustomerhasbeenbilled.D.Collectionhasbeenmadeandwarranteeshaveexpired.100.Whichofthefollowingbestdemonstratesthefulldisclosureprinciple?A.Themulti-stepincomestatement.B.Theauditors'report.C.Thecompany'staxreturn.D.Disclosurenotestofinancialstatements.101.Thematchingprincipleis:A.Avaluationmethod.B.Anexpenserecognitionaccountingprinciple.C.Acashbasisreportingprinciple.D.Anassetclassificationprocedure.102.Tomeettheneedsoffulldisclosure,companiesusesupplementalinformation,including:A.Parentheticalcommentsormodifyingcommentsplacedonthefaceofthefinancialstatements.B.Disclosurenotesconveyingadditionalinsightsaboutcompanyoperations,accountingprinciples,contractualagreements,andpendinglitigation.C.Supplementalfinancialstatementsthatreportmoredetailedinformationthanisshownintheprimaryfinancialstatements.D.Alloftheabovearecorrect.103.FordMotorCompanypurchasesservicesfromsuppliersonaccountandsellsitsproductstodistributorsonshorttermcredit.Asaresult,doeachoftheseeventsaffectnetincomefasterthantheyaffectnetoperatingcashflows?A.OptionaB.OptionbC.OptioncD.Optiond104.Therevenue/expenseapproachemphasizes:A.Recognitionofrevenues(typicallyapplyingtherealizationprinciple).B.Recognitionofexpenses(typicallyapplyingthematchingprinciple).C.Theincomestatement.D.Alloftheabovearecorrect.105.Theasset/liabilityapproachemphasizes:A.Whetheramountsonthebalancesheetmeetthedefinitionsofassetsandliabilities.B.Acloserelationbetweenthebalancesheetandthestatementofcashflows.C.Thedistinctionbetweennetassetsandgrossassets.D.Alloftheabovearecorrect.106.UnderIFRS,theroleoftheconceptualframework:A.PrimarilyinvolvesguidingstandardsetterstomakesurethatstandardsareconsistentwitheachotherB.Includesservingasaguideforpractitionerswhenaspecificstandarddoesnotapply.C.IslessimportantthaninU.S.GAAP.D.HasresultedprimarilyfromaconvergencewithU.S.GAAP.107.UnderIFRS,theconceptualframework:A.Emphasizestheoverarchingconceptofthefinancialstatementsprovidinga"trueandfairrepresentation"ofthecompany.B.Isnotdesignedtoprovideguidancetostandardsetters,butratheronlytopractitioners.C.Isnotdesignedtoprovideguidancetopractitioners,butratheronlytostandardsetters.D.SpecifiesasetofrulesthatdeterminewhatconstitutesatrueIFRSstandard.