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Trang 180 Test Bank for Intermediate Accounting 8th Edition
by Spiceland
Multiple Choice Questions
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.
The primary focus for financial accounting information is to
provide information useful for:Investing decisions; Credit
decisions (respectively)
1 a.Yes Yes
Which of the following groups is not among the external users for whom financial statements are prepared?
1 a.Customers.
2 b.Suppliers.
4 d.Customers, suppliers, and employees are all external users of financial statements.
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 work papers.
4 d.All of the above are provisions of the Act.
In the Norwalk Agreement, the FASB and IASB pledged to:
1 a.Combine their organizations to form the BUSYB.
2 b.Make progress on specific MOU projects.
3 c.Achieve convergence by the year 2015.
4 d.Remove existing differences between their standards.
Which of the following is not a concern expressed by the SEC regarding IFRS adoption by the U.S.?
Trang 21 a.Need for the U.S to have strong influence on the standard-setting
process and ensure that standards meet U.S needs.
2 b.The language barriers associated with cooperation among many
countries in developing IFRS.
3 c.The high costs to companies of converting to IFRS.
4 d.The fact that many laws, regulations and private contracts reference U.S GAAP.
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.
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.
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.
Which of the following has the statutory authority to set
accounting standards in the United States?
3 c.SEC.
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.
Trang 34 d.Mergers and acquisitions.
The conceptual framework's qualitative characteristic of relevance includes:
1 a.Predictive value.
2 b.Verifiability.
4 d.Neutrality.
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.
Corporations issue their shares to the investing public in the:
Primary market; Secondary market (respectively)
3 c.Yes No
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.
SFAC 8 of the 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.
The FASB issues accounting standards in the form of:
1 a.Accounting Research Bulletins.
2 b.Accounting Standards Updates.
3 c.Financial Accounting Standards.
4 d.Financial Technical Bulletins.
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.
Trang 42 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, 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.
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.
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 primary professional organization for those accountants
working in industry is the:
3 c.IIA.
4 d.IMA.
One of the elements that many believe distinguishes a profession from other occupations is the acceptance of responsibility by its members for the interests of those it serves, which is often
articulated in:
1 a.Its conceptual framework.
2 b.Its code of ethics.
3 c.Federal laws.
4 d.State laws.
The FASB's standard-setting process includes, in the correct order:
Trang 51 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.
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 postretirement benefits other than pensions.
3 c.Accounting for business combinations.
4 d.Accounting for stock-based compensation.
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.
Which of the following is not a potential benefit of accrual
accounting, compared to cash-basis accounting?
1 a.Timeliness.
2 b.Better reflecting economic activity.
3 c.Periodicity.
4 d.Better matching of revenues and expenses.
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.
SFAC No.5 focuses on:
1 a.Objectives of financial reporting.
2 b.Qualitative characteristics of accounting information.
3 c.Recognition and measurement concepts in accounting.
4 d.Elements of financial statements.
Independent auditors express an opinion on the:
1 a.Fairness of financial statements.
Trang 62 b.Accuracy of financial statements.
3 c.Soundness of a company's future.
4 d.Quality of a company's management.
When a registrant company submits its annual filing to the SEC, it uses:
1 a.Form 10-A.
2 b.Form 10-K.
3 c.Form 10-Q.
4 d.Form S-1.
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.An auditor’s responsibility to inform the SEC.
CPAs are licensed by:
3 c.The federal government.
4 d.State governments.
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.
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.
Porite Company recognizes revenue in the period in which it
records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash Porite’s practice is an example of:
1 a.Cash basis accounting.
Trang 72 b.Accrual accounting.
3 c.The matching principle.
4 d.Economic entity.
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.
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.
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.
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:
1 a.Conservatism.
2 b.The matching principle.
3 c.Realization principle.
4 d.Economic entity.
80 Free Test Bank for Intermediate Accounting 8th
Edition by Spiceland Multiple Choice Questions - Page 2
A constraint on qualitative characteristics of accounting
information is:
1 a.Timeliness.
Trang 82 b.Going concern.
3 c.Neutrality.
4 d.Cost-effectiveness.
Elements of financial statements do not include:
1 a.Monetary unit.
2 b.Investments by owners.
3 c.Comprehensive income.
4 d.Losses.
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 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.
Which of the following is typically characterized as a principle, rather than an assumption?
1 a.Periodicity.
2 b.Monetary unit.
3 c.Conservatism.
4 d.Full disclosure.
Ford Motor Company purchases services from suppliers on
account and sells its products to distributors on short-term credit
As a result, do each of these events affect net income faster than they affect net operating cash flows? Purchase Services Sell Products (respectively)
1 a.Yes Yes
Enhancing qualitative characteristics of accounting information include:
1 a.Relevance and comparability.
Trang 92 b.Comparability and timeliness.
3 c.Understandability and relevance.
4 d.Neutrality and consistency.
Maltec Corporation has started placing its quarterly financial
statements on its web page, thereby reducing by 10 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.
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.
Under IFRS, the conceptual framework:
1 a.Emphasizes the overarching concept of the financial statements providing
a “true and fair representation” of the company.
2 b.Is not designed to provide guidance to standard setters, but rather only to practitioners.
3 c.Is not designed to provide guidance to practitioners, but rather only to standard setters.
4 d.Specifies a set of rules that determine what constitutes a true IFRS
standard.
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.
Trang 103 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.
The primary objective of financial accounting information is to provide useful information to:
2 b.Capital providers.
3 c.Regulators.
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.
4 d.Verifiability.
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.
If a company has declared bankruptcy, its financial statements likely violate:
1 a.The fair value measurement approach.
2 b.The present value measurement approach.
3 c.The stable monetary unit assumption.
4 d.The going concern assumption.
The revenue/expense approach emphasizes:
1 a.Recognition of revenues.
2 b.Recognition of expenses.
3 c.The income statement.
4 d.All of the above are correct.
Trang 11Change in equity from nonowner sources is:
1 a.Comprehensive income.
4 d.Gains and losses.
The asset/liability approach emphasizes:
1 a.Whether amounts on the balance sheet meet the definitions of assets and liabilities.
2 b.A close relation between the balance sheet and the statement of cash flows.
3 c.The distinction between net assets and gross assets.
4 d.All of the above are correct.
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.
Land was acquired in 2016 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.
Which of the following best describes the additional information that companies use to meet the requirements of full disclosure in financial statements?
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 schedules and tables that report more detailed information than is shown in the primary financial statements.
4 d.Comments on the face of the financial statements, and schedules, tables, and narrative disclosures in notes to the financial statements.