69 test bank for intermediate accounting 6th

Credit rating organizations Which of the following has the authority to set accounting standards in the United States.. SEC The conceptual framework's recognition and measurement concept

69 Test Bank for Intermediate Accounting 6th

Edition by Spiceland

Multiple Choice Questions

CPAs are licensed by:

3. C The federal government

4. D State governments

GAAP is an abbreviation for:

1. A Generally authorized accounting procedures

2. B Generally applied accounting procedures

3. C Generally accepted auditing practices

4. D Generally accepted accounting principles

Pronouncements issued by the Committee on Accounting

Procedures:

1. A Dealt with specific accounting and reporting problems

2. B Were based on exposure drafts and public comment letters

3. C Originated from congressional studies and SEC directives

4. D Were the outcome of research studies and a theoretical framework

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

1. A Corporate executive accountability

2. B Auditor rotation

3. C Retention of workpapers

4. D All of the above are provisions of the Act.

The most recent example of the political process at work in

standard setting is the heated debate that occurred on the issue of:

1. A Pension plan accounting

2. B Accounting for posteretirement benefits other than pensions

3. C Accounting for business combinations

4. D Accounting for stock-based compensation

Accounting standard setting has been characterized as:

1. A A political process

2. B Using the scientific method

3. C Pure deductive reasoning

4. D Pure inductive reasoning

The conceptual framework's qualitative characteristic of relevance includes:

1. A Predictive value

2. B Verifiability

3. C Completeness

4. D Neutrality

The conceptual framework's qualitative characteristic of faithful representation includes:

1. A Predictive value

2. B Neutrality

3. C Confirmatory value

4. D Timeliness

The recognition of which of the following expenses exemplifies the application of the matching principle?

1. A President's salary

2. B Research and development

3. C Cost of goods sold

4. D Advertising

The most likely important flaw leading to the demise of the APB was the perceived lack of:

1. A Confidence

3. C Independence

4. D Importance

Which of the following does not apply to secondary markets?

1. A Transactions are important to the efficient allocation of resources in our economy

2. B New resources are provided when shares of stock are sold by the

corporation to the initial owners

3. C Transactions help to establish market prices for additional shares that may be issued in the future

4. D Many investors might be unwilling to provide resources to corporations if there is no available mechanism for the future sale of their stocks and bonds

to others

In a recent annual report, Apple Computer reported the following

in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This note exemplifies Apple's use of:

2. B The matching principle

3. C Realization principle

4. D Economic entity

Which of the following groups is not among financial

intermediaries?

1. A Mutual fund managers

2. B Financial analysts

3. C CPAs

4. D Credit rating organizations

Which of the following has the authority to set accounting standards in the United States?

3. C SEC

The conceptual framework's recognition and measurement concepts recognize which of the following as an assumption, rather than a principle?

1. A Going concern

2. B Historical cost

3. C Full disclosure

4. D Realization

The SEC issues accounting standards in the form of:

1. A Accounting Research Bulletins

2. B Financial Reporting Releases

3. C Financial Accounting Standards.

4. D Financial Technical Bulletins

The most political issue in the FASB's most recent deliberations and amendments to GAAP on business combinations was:

1. A The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the purchase method of accounting for the

combination

2. B The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the pooling method of accounting for the

combination

3. C The unrealistic balance sheet assets that would be created if firms were required to use the purchase method of accounting for the combination

4. D The unrealistic balance sheet assets that would be created if firms were required to use the pooling method of accounting for the combination

A firm's comprehensive income always:

1. A Is the same as its net income

2. B Is greater than its net income

3. C Is less than its net income

4. D Could be greater than or less than net income

The primary professional organization for those accountants working in industry is the:

3. C IIA

4. D IMA

The FASB's conceptual framework's qualitative characteristics of accounting information include:

1. A Full disclosure

2. B Relevance.

3. C Going concern

4. D Historical cost

The full disclosure principle requires a balance between:

1. A Comparability and consistency

2. B Relevance and cost effectiveness

3. C Reliability and neutrality

4. D Timeliness and predictive value

Which of the following is not true about net operating cash flow?

1. A It is the difference between cash receipts and cash disbursements from providing goods and services

2. B It is a measure used in accrual accounting and is recognized as the best predictor of future operating cash flows

3. C Over short periods of time, it may not be indicative of long-run cash-generating ability

4. D It is easy to understand and all information required to measure it is factual

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002

(Sarbanes-Oxley)? The Act:

1. A Changed the entity responsible for setting auditing standards

2. B Increased corporate executive responsibility for financial statements

3. C Limited nonaudit services that can be performed by auditors for audit clients

4. D Changed the entity responsible for setting accounting standards

The conceptual framework's recognition and measurement

concepts recognize which of the following as a principle, rather than an assumption?

1. A Periodicity.

2. B Monetary unit

3. C Conservatism

4. D Full disclosure

A cause-and-effect relationship is implicit in the:

1. A Realization principle

2. B Historical cost principle

3. C Matching principle

4. D Going concern assumption

The primary historical reason for the FASB reversing its positions when political pressures occur is:

1. A The cost of gathering data was prohibitive

2. B The difficulties in measurement were too great

3. C They have no authority in such situations

4. D The SEC did not support the FASB position

The International Accounting Standards Board:

1. A Was the predecessor to the IASC

2. B Can overrule the FASB when their policies disagree

3. C Promotes the use of high-quality, understandable global accounting standards

4. D Has its headquarters in Geneva

Which of the following groups is not among the external users for whom financial statements are prepared?

2. B Suppliers

3. C Employees

4. D All of the above are external users of financial statements

Which of the following was the first private sector entity that set accounting standards in the United States?

1. A Accounting Principles Board

2. B Committee on Accounting Procedure

3. C Financial Accounting Standards Board

The FASB's conceptual framework's qualitative characteristics of accounting information include:

1. A Historical cost

2. B Realization

3. C Faithful representation

4. D Full disclosure

Phase A of the new conceptual framework focuses on:

1. A Objective and qualitative characteristics

2. B Presentation and disclosure

3. C Recognition and measurement

4. D Elements of financial statements

External decision makers would not look primarily to financial accounting information to assist them in making decisions on:

1. A Granting credit

2. B Capital budgeting

3. C Selecting stocks

4. D Mergers and acquisitions

When a registrant company submits its annual filing to the SEC, it uses:

1. A Form 10-A

2. B Form 10-K

4. D Form S-1

The FASB's standard-setting process includes, in the correct order:

1. A Exposure draft, research, discussion paper, Accounting Standards Update

2. B Research, exposure draft, discussion paper, Accounting Standards Update

3. C Research, discussion paper, exposure draft, Accounting Standards Update

4. D Discussion paper, research, exposure draft, Accounting Standards Update

69 Free Test Bank for Intermediate Accounting 6th Edition by Spiceland Multiple Choice Questions - Page 2

Of the following, the most important objective for financial

reporting is to provide information useful for:

1. A Making decisions

2. B Determining taxable income

3. C Providing accountability

4. D Increasing future profits

One of the elements that many believe distinguishes a profession from other occupations is the acceptance by its members of a

responsibility for the interests of those it serves, often articulated in:

1. A Its conceptual framework

2. B Its code of ethics

3. C Federal laws

4. D State laws

Four different competent accountants independently agree on the amount and method of reporting an economic event The concept demonstrated is:

1. A Reliability

2. B Comparability

3. C Completeness

4. D Verifiability

Maltec Corporation has started placing its quarterly financial statements on its web page, thereby reducing by ten days the time to get information to investors and creditors The qualitative concept improved is:

1. A Comparability

2. B Consistency

3. C Timeliness

4. D Faithful representation

If a company has gone bankrupt, its financial statements likely violate:

1. A The matching principle

2. B The realization principle

3. C The stable monetary unit assumption

4. D The going concern assumption.

Which of the following best demonstrates the full disclosure

principle?

1. A The multi-step income statement

2. B The auditors' report

3. C The company's tax return

4. D Disclosure notes to financial statements

When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic?

1. A Verifiability

2. B Predictive value

3. C Faithful representation

4. D Timeliness

Mega Loan Company has very stringent credit requirements and, accordingly, has negligible losses from uncollectible accounts The company's independent accountants did not protest when, contrary to GAAP, the company recorded bad debt expense only when specific accounts were determined to be uncollectible, rather than use an allowance for uncollectible accounts The concept demonstrated is:

1. A Comparability

2. B Faithful representation

3. C Cost effectiveness

4. D Materiality

Surefeet Corporation changed its inventory valuation method Which characteristic is jeopardized by this change?

1. A Comparability.

2. B Representational faithfulness

3. C Consistency

4. D Feedback value

Recognizing expected losses immediately, but deferring expected gains, is an example of:

1. A Materiality

2. B Conservatism

3. C Cost effectiveness

4. D Timeliness

Disclosure notes to a company's financial statements:

1. A Are relatively unimportant facts that don't belong in the basic financial statements

2. B Document the source of financial statement facts, like literary footnotes

3. C Are an integral part of a company's financial statements

4. D Are irrelevant facts that are immaterial in amount

According to the conceptual framework, verifiability implies:

1. A Legal evidence

2. B Logic

3. C Consensus

4. D Legal verdict

An important argument in support of historical cost information is:

1. A Relevance

2. B Predictive quality for future cash flows

3. C Materiality.

4. D Verifiability

The main issue in the debate over accounting for employee stock options was:

1. A Which employees should receive options

2. B The amount of compensation expense that a company should recognize

3. C How many options should be granted to key executives

4. D The tax consequences of employee stock options

Primecoat Corporation could disseminate its annual financial statements two days earlier if it shifted substantial human

resources from other operations to the annual report project Management decided the value of the earlier report was not worth the added commitment of resources The concept demonstrated is:

1. A Timeliness

2. B Materiality

3. C Relevance

4. D Cost effectiveness

Land was acquired in 2011 for a future building site at a cost of

$40,000 The assessed valuation for tax purposes is $27,000, a qualified appraiser placed its value at $48,000, and a recent firm offer for the land was for a cash payment of $46,000 The land should be reported in the financial statements at:

1. A $40,000

2. B $27,000

3. C $46,000

4. D $48,000

Enhancing qualitative characteristics of accounting information include:

1. A Relevance and comparability

2. B Comparability and timeliness

3. C Understandability and relevance

4. D Neutrality and consistency

The enhancing qualitative characteristic of understandability

means that information should be understood by:

1. A Those who are experts in the interpretation of financial information

2. B Those who have a reasonable understanding of business and economic activities

3. C Financial analysts

The matching principle is:

1. A A valuation method

2. B An expense recognition accounting principle

3. C A cash basis reporting principle

4. D An asset classification procedure

The possibility that the capital markets' focus on periodic profits may tempt a company's management to bend or even break accounting rules to inflate reported net income is an example of:

1. A An ethical dilemma

2. B An accounting theory issue

3. C A technical accounting issue

4. D None of the above is correct

Fundamental qualitative characteristics of accounting information are:

1. A Relevance and comparability

2. B Comparability and consistency

3. C Faithful representation and relevance

4. D Neutrality and consistency

Net income equals:

1. A Assets minus liabilities

2. B Revenues minus cost of goods sold

3. C Revenues minus expenses

4. D Cash receipts minus cash payments

Change in equity from nonowner sources is:

1. A Comprehensive income

3. C Expenses

4. D Gains and losses

To meet the needs of full disclosure, companies use

supplemental information, including:

1. A Parenthetical comments or modifying comments placed on the face of the financial statements

2. B Disclosure notes conveying additional insights about company

operations, accounting principles, contractual agreements, and pending litigation

3. C Supplemental financial statements that report more detailed information than is shown in the primary financial statements

4. D All of the above are correct