78 Test Bank for Intermediate Accounting 19th Edition by Stice Multiple Choice Questions - Page 1 The process of establishing financial accounting standards is 1.. Financial Accounting
Trang 178 Test Bank for Intermediate Accounting 19th Edition
by Stice
Multiple Choice Questions - Page 1
The process of establishing financial accounting standards is
1 a a democratic process in that a majority of practicing accountants must agree with a standard before it becomes implemented
2 b a legislative process based on rules promulgated by government
agencies
3 c based solely on economic analysis of the effects each standard will have
if it is implemented
4 d a social process which incorporates political actions of various interested user groups as well as professional research and logic
Which of the following is an internal user of a company's financial information?
1 a Board of directors
2 b Stockholders in the company
3 c Holders of the company's bonds
4 d Creditors with long-term contracts with the company
Accounting standards help accountants meet the information demands of interested parties by providing:
1 a legislation introduction pertaining to financial reporting
2 b limits and guidance for financial reporting
3 c improved operating plans to the Board
4 d reports to the Media
The primary current source of generally accepted accounting principles for governmental operations is the
1 a Financial Accounting Standards Board
2 b Securities and Exchange Commission
3 c Governmental Accounting Standards Board
Trang 24 d Government Accounting Office.
The normal order followed by the FASB in publishing its
standards is
1 a statement, discussion memorandum, opinion
2 b discussion memorandum, interpretation, exposure draft, statement
3 c exposure draft, discussion memorandum, statement
4 d discussion memorandum, exposure draft, statement
The Governmental Accounting Standards Board
1 a was incorporated into the Financial Accounting Standards Board when the FASB was created
2 b addresses financial reporting issues of U.S government treaties and treasury rulings
3 c addresses the financial reporting issues related to state and local governments
4 d addresses the governmental reporting activities of the SEC
The following is NOT a major component of the financial
statements:
1 a auditor’s opinion
2 b annual report
3 c explanatory notes
4 d balance sheet
In 1973, the following private-sector body was organized to set accounting standards in the United States:
1 a the Financial Accounting Foundation
2 b the Securities and Exchange Commission
3 c the FASB
4 d the Accounting Principles Board
Documents issued by the FASB include all of the following
except
1 a Statements of Financial Accounting Standards
Trang 32 b Interpretations of Statements of Financial Accounting Standards.
3 c Statements of Financial Accounting Concepts
4 d Financial Reporting Releases
How many board members serve on the FASB?
1 a 5
2 b 7
3 c 14
4 d 20
Primary responsibility for GAAP and public reporting currently rests with the
1 a SEC
2 b FASB
3 c Congress
4 d AICPA
A major difference between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is
1 a all members of the FASB serve full time, are paid a salary, and are independent of any public or private enterprises
2 b over 50 percent of the members of the FASB are required to be Certified Public Accountants
3 c the FASB issues exposure drafts of proposed standards
4 d all members of the FASB possess experience in both public and
corporate accounting
As independent (or external) auditors, CPAs are primarily
responsible for
1 a preparing financial statements in conformity with GAAP
2 b certifying the accuracy of financial statements
3 c expressing an opinion as to the fairness of financial statements
4 d filing financial statements with the SEC
Trang 4The overall objective of financial reporting is to provide
information
1 a that is useful for decision making
2 b about an enterprise's assets, liabilities, and owners' equity
3 c about an enterprise's financial performance during a period
4 d that allows owners to assess management's performance
The area of accounting that emphasizes developing accounting information for use within a company is known as accounting
1 a management
2 b forensic
3 c audit
4 d financial
The primary current source of generally accepted accounting principles for nongovernmental operations is the
1 a American Institute of Certified Public Accountants
2 b Securities and Exchange Commission
3 c Financial Accounting Standards Board
4 d Governmental Accounting Standards Board
The responsibility to review the work of the accountants and issue opinions as to the fairness of the financial statements rests with
1 a the external auditor
2 b the board of directors
3 c the internal auditors
4 d management
Operations of the FASB are overseen by the:
1 a operations of the AICPA
2 b Financial Accounting Foundation
3 c AAA
4 d financial reporting arm of the SEC
Trang 5The staff interpretations statements issued by the SEC are
called:
1 a Staff Accounting Research Bulletins
2 b Statements on Accounting Principles
3 c Financial Accounting Standards
4 d Staff Accounting Bulletins
The responsibility of the Emerging Issues Task Force (EITF) is to
1 a issue statements which reflect a consensus of the EITF on how to
account for new financial reporting issues where guidance is needed quickly
2 b do research on financial reporting issues that are being addressed by the AICPA
3 c respond to groups lobbying the FASB on issues that affect a particular industry
4 d develop concept statements the AICPA can use as a frame of reference
to solve future problems
Which of the following is a characteristic of the Financial
Accounting Standards Board?
1 a The FASB is composed of five members
2 b FASB members must come from CPA firms
3 c FASB members are part-time
4 d FASB members may retain their positions with previous employers
When the FASB deliberates about an accounting standard, firms whose financial statements would be affected by that standard
1 a are legally barred from lobbying the FASB
2 b are not allowed to lobby the FASB if the standard would have a negative impact on their financial statements
3 c are not allowed to lobby the FASB if the standard would have a positive impact on their financial statements
4 d are free to lobby for or against the standard
The following are users of accounting information:
1 a stakeholders
Trang 62 b creditors
3 c investors
4 d all of the above
The SEC was given the power to establish accounting principles including setting requirements for details shown on financial
statements by the:
1 a FASB
2 b AICPA
3 c Congress
4 d AAA
The members of the are appointed by the Financial Accounting Foundation
1 a American Accounting Association
2 b Financial Accounting Standards Board
3 c Securities and Exchange Commission
4 d American Institute of Certified Public Accountants
Once the FASB has established an accounting standard, the
1 a standard is continually reviewed to see if modification is necessary
2 b standard is not reviewed unless the SEC makes a complaint
3 c task of reviewing the standard to see if modification is necessary is given
to the AICPA
4 d principle of consistency requires that no revisions ever be made to the standard
accounting focuses on the development and
communication of financial information for external users
1 a management
2 b forensic
3 c audit
4 d financial
Trang 7Interested parties receive information about a company’s past performance from:
1 a CEO’s
2 b the SEC
3 c financial reporting
4 d financial news
Proper application of accounting principles is most dependent upon the
1 a existence of specific guidelines
2 b oversight of regulatory bodies
3 c external audit function
4 d professional judgment of the accountant
The of a firm is primarily responsible for the
preparation of financial statements in accordance with GAAP
1 a the internal auditors
2 b management
3 c the external auditors
4 d the board of directors
Which of the following is NOT normally an objective of financial reporting?
1 a To provide information about an entity's assets and claims against those assets
2 b To provide information that is useful in assessing an entity's sources and uses of cash
3 c To provide information that is useful in lending and investing decisions
4 d To provide information about an entity's liquidation value
78 Free Test Bank for Intermediate Accounting 19th Edition by Stice Multiple Choice Questions - Page 2
Trang 8Accounting for inventories by applying the lower-of-cost-or-market
is an example of the application of
1 a conservatism
2 b comparability
3 c consistency
4 d materiality
Financial statements issued for the use of parties external to the enterprise are the primary responsibility of the
1 a management of the enterprise
2 b stockholders of the enterprise
3 c independent auditors of the enterprise
4 d creditors of the enterprise
A conceptual framework of accounting should
1 a lead to uniformity of financial statements among companies within the same industry
2 b eliminate alternative accounting principles and methods
3 c guide the AICPA in developing generally accepted auditing standards
4 d define the basic objectives, terms, and concepts of accounting
The branch of accounting that is concerned with providing
information to present and potential creditors of an enterprise is
1 a auditing
2 b managerial accounting
3 c financial accounting
4 d income tax accounting
The journal Accounting Horizons is published by which of the following organizations?
1 a American Institute of Certified Public Accountants (AICPA)
2 b American Accounting Association (AAA)
3 c Securities and Exchange Commission (SEC)
4 d Financial Accounting Standards Board (FASB)
Trang 9Enron’s problem with related-party transactions breached the assumption of:
1 a going concerns
2 b arm’s-length transactions
3 c freedom of enterprise
4 d market stability
According to the FASB's conceptual framework, the process of reporting an item in the financial statements of an entity is
1 a realization
2 b recognition
3 c matching
4 d allocation
Which of the following statements concerning the objectives of financial reporting is correct?
1 a The objectives are intended to be specific in nature
2 b The objectives are directed primarily toward the needs of internal users
of accounting information
3 c The objectives were the end result of the FASB's conceptual framework project
4 d The objectives encompass not only financial statement disclosures, but other information as well
Conservatism is best described as selecting an accounting
alternative that
1 a understates assets and/or net income
2 b has the least favorable impact on owners' equity
3 c overstates, as opposed to understates, liabilities
4 d is least likely to mislead users of financial information
Accountants prepare financial statements at arbitrary points in time during a company's lifetime in accordance with the
accounting concept of
Trang 101 a matching.
2 b comparability
3 c accounting periods
4 d materiality
An item would be considered material and therefore would be disclosed in the financial statements if the
1 a expected benefits of disclosure exceed the additional costs
2 b impact on earnings is greater than 3 percent
3 c FASB definition of materiality is met
4 d omission of misstatement of the amount would make a difference to the users
The primary measurement basis currently used to value assets in external financial statements of an enterprise is the
1 a current market price if the assets currently held by an enterprise were sold on the open market
2 b current market price if the assets held by an enterprise were purchased
on the open market
3 c present value of the cash flows the assets are expected to generate over their remaining useful lives
4 d market price of the assets held by an enterprise at the date the assets were acquired (although some assets may be valued at their current selling price or net realizable value)
Important constraints underlying the qualitative characteristics of accounting information are
1 a historical cost and going concern
2 b materiality, conservatism, and cost-effectiveness
3 c consistency, comparability, and conservatism
4 d verifiability, neutrality, and representational faithfulness
The financial statements that are prepared for the business are separate and distinct from the owners according to the
1 a going-concern assumption
2 b matching principle
Trang 113 c economic entity assumption.
4 d full disclosure principle
Which of the following is true about international accounting
standards?
1 a Significant differences exist between U.S GAAP and GAAP of other countries
2 b Few differences exist between U.S GAAP and GAAP of other countries
3 c The IASB is the standards-setting body of France
4 d It is unlikely that the differences between U.S GAAP and GAAP of other countries will diminish over time
Internal users are provided information by the following branch of accounting:
1 a auditing
2 b managerial accounting
3 c financial accounting
4 d income tax accounting
Financial information exhibits the characteristic of consistency when
1 a accounting procedures are adopted which smooth net income and make results consistent between years
2 b extraordinary gains and losses are shown separately on the income statement
3 c accounting entities give similar events the same accounting treatment each period
4 d expenditures are reported as expenses and netted against revenue in the period in which they are paid
When financial reports from two different companies have been prepared and presented in a similar manner, the information exhibits the characteristic of
1 a relevance
2 b reliability
Trang 123 c comparability.
4 d consistency
When a large number of individuals, using the same
measurement method, demonstrate that a high degree of
consensus can be secured among independent measurers, then the result exhibits the characteristic of
1 a verifiability
2 b neutrality
3 c relevance
4 d reliability
The assumed continuation of a business entity in the absence of evidence to the contrary is an example of the accounting concept
of
1 a accrual
2 b consistency
3 c comparability
4 d going concern
The United States Securities and Exchange Commission
1 a has recognized IASB standards as an acceptable alternative to U.S GAAP
2 b requires foreign companies listing their shares on U.S stock exchanges
to restate their financial statements to U.S GAAP
3 c has barred foreign companies from listing their shares on U.S stock exchanges
4 d has no jurisdiction in the United States over foreign companies listing their shares on U.S stock exchanges
Financial disclosure statements are strictest in
1 a the United Kingdom
2 b Germany
3 c the United States
4 d France