81 test bank for intermediate accounting 18th edition

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81 Test Bank for Intermediate Accounting 18th Edition

Multiple Choice Questions - Page 1

The primary purpose of the Securities and Exchange

Commission is to

1. a.regulate the issuance and trading of securities

2 b.issue accounting and auditing regulations for publicly held companies

3 c.prevent the trading of speculative securities

4 d.enforce generally accepted accounting principles

The Governmental Accounting Standards Board

1. a.was incorporated into the Financial Accounting Standards Board when the FASB wascreated

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

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

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

The 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 following are users of accounting information:

1. a.stakeholders

2 b.creditors

3 c.investors

4 d.all of the above

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 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

Generally accepted accounting principles

1. a.are accounting adaptations based on the laws of economic science

2 b.derive their credibility and authority from legal rulings and court precedents

3 c.derive their credibility and authority from the federal government through the financialreporting section of the SEC

4 d.derive their credibility and authority from general recognition and acceptance by the accounting profession

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

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

Interested parties receive information about a company’s past performance from:

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

accounting focuses on the development and

communication of financial information for external users

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

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

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

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

The International Accounting Standards Board was formed to

1. a.enforce FASB standards in foreign countries

2 b.develop worldwide accepted accounting standards

3 c.establish accounting standards for U.S multinational companies

4 d.develop accounting standards for countries that do not have their own setting bodies

standard-The following private-sector organization was created by the Sarbanes-Oxley Act of 2002 to perform required audits on U S publicly traded companies:

1. a.AICPA

2 b.Public Company Accounting Oversight Board

3 c.Financial Executives Institute

4 d.Financial Accounting Standards Board

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

4 d.Government Accounting Office

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

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

Form 10-K is submitted to the

2 b.Stockholders in the company

3 c.Holders of the company's bonds

4 d.Creditors with long-term contracts with the company

Primary responsibility for GAAP and public reporting currently rests with the

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

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

1. a.the Financial Accounting Foundation

2 b.the Securities and Exchange Commission

3 c.the FASB

4 d.the Accounting Principles Board

The SEC was given the power to establish accounting

principles including setting requirements for details shown on financial statements by the:

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

Which of the following items is not a modifying convention?

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

Documents issued by the FASB include all of the following except

1. a.Statements of Financial Accounting Standards

2 b.Interpretations of Statements of Financial Accounting Standards

3 c.Statements of Financial Accounting Concepts

4 d.Financial Reporting Releases

76 Free Test Bank for Intermediate Accounting 18th Edition by Stice Multiple Choice Questions - Page 2

Which of the following is NOT a purpose of the conceptual framework of accounting?

1. a.To provide definitions of key terms and fundamental concepts

2 b.To provide specific guidelines for resolving situations not covered by existing accounting standards

3 c.To assist accountants and others in selecting among alternative accounting and reporting methods

4 d.To assist the FASB in the standard-setting process

Large business enterprises employ financial accountants who are primarily concerned with financial reporting

1. a.The historical cost principle is credible

2 b.Depreciation and amortization policies are justifiable and appropriate

3 c.The current/noncurrent classification of assets and liabilities is justifiable and significant

4 d.Amortizing research and development costs over multiple periods is justifiable and appropriate

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

The branch of accounting that is concerned with providing information to present and potential creditors of an enterprise

Accounting for inventories by applying the market is an example of the application of

lower-of-cost-or-1. a.conservatism

2 b.comparability

3 c.consistency

4 d.materiality

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 accrual basis of accounting is based primarily on

1. a.conservatism and revenue realization

2 b.conservatism and matching

3 c.consistency and matching

4 d.revenue realization and matching

What accounting concept justifies the use of accruals and

In an effort to improve the conceptual framework, the FASB, in conjunction with the IASB has been moving towards more

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)

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

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

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

According to the FASB's conceptual framework, the process of reporting an item in the financial statements of an entity is

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)

The secondary qualitative characteristics of accounting

information are

1. a.relevance and reliability

2 b.comparability and consistency.

3 c.understandability and decision usefulness

4 d.materiality and conservatism

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

Enron’s problem with related-party transactions breached the assumption of:

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.

When financial reports from two different companies have been prepared and presented in a similar manner, the information exhibits the characteristic of

Recording the purchase price of a paper shredder (with an

estimated useful life of 10 years) as an expense of the current period is justified by the

1. a.going-concern assumption

2 b.materiality constraint

3 c.matching principle

4 d.comparability principle

Which of the following is true?

1. a.Form 10-K is required under the FASB Conceptual Framework

2 b.Form 10-Q is a quarterly report of significant events required by the SEC

3 c.Form 8-K is a quarterly report of significant events required by the SEC

4 d.Form 8-K is the annual report submitted by small businesses to the SEC

Which of the following qualitative characteristics of financial information requires that information NOT be biased in favor of one group of users to the detriment of others?

1. a.Relevance

2 b.Reliability

3 c.Verifiability

4 d.Neutrality

Financial disclosure statements are strictest in

1. a.the United Kingdom

3 c.economic entity assumption

4 d.full disclosure principle

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