87 test bank for intermediate accounting 5th edition

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87 Test Bank for Intermediate Accounting 5th Edition True - False Questions

The FASB is currently the public sector organization

responsible for setting accounting standards in the U.S

1 True

2 False

Gains or losses result, respectively, from the disposition of

business assets for greater than, or less than, their book values

1 True

2 False

The Public Reform and Investor Protection Act of 2002

(Sarbanes-Oxley) changed the entity responsible for setting auditing standards in the United States

1 True

2 False

Conservatism is a desired qualitative characteristic of

accounting information

1 True

2 False

SFAC No 157 doesn't change the situations in which fair value

is used under current GAAP

1 True

2 False

The primary function of financial accounting is to provide

relevant financial information to parties external to

business enterprises

1 True

2 False

Accrual accounting attempts to measure revenues and

expenses that occurred during accounting periods so they equal net operating cash flow

1 True

2 False

A rules-based approach to standard setting stresses

professional judgment as opposed to following a list of rules

1 True

2 False

Revenues are inflows or other enhancements of assets or

settlements of liabilities from activities that constitute the entity's ongoing operations

1 True

2 False

The primary responsibility for properly applying GAAP when

communicating with investors and creditors through

financial statements lies with a firm's auditors

1 True

2 False

Materiality can be affected by the dollar amount of an item, the

nature of the item, or both

1 True

2 False

Auditors play an important role in the resource allocation

process by adding credibility to financial statements

1 True

2 False

Under federal securities laws, the SEC has the authority to set

accounting standards in the U.S

1 True

2 False

Equity is a residual amount representing the owner's interest in

the assets of the business

1 True

2 False

Comprehensive income is another term for net income

1 True

2 False

Determining fair value by calculating the present value of future

cash flows is a level 1 type of input

1 True

2 False

Multiple Choice Questions - Page 1

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 conceptual framework's qualitative characteristic of

relevance includes:

1 A Timeliness.

2 B Verifiability.

3 C Representational faithfulness.

4 D Neutrality.

The conceptual framework's qualitative characteristic of

reliability includes:

1 A Predictive value.

2 B Neutrality.

3 C Feedback value.

4 D Timeliness.

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.

Financial accounting information should provide information

about:

1 A Resources of an enterprise.

2 B Claims to resources.

3 C The effects of transactions that cause changes in resources.

4 D All of these.

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.

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

order:

1 A Exposure draft, research, discussion memorandum, SFAS.

2 B Research, exposure draft, discussion memorandum, SFAS.

3 C Research, discussion memorandum, exposure draft, SFAS.

4 D Discussion memorandum, research, exposure draft, SFAS.

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.

The primary historical reason for the FASB reversing its

positions when political pressures occur is:

1 A The cost 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.

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 FASB issues a Statement of Accounting Standards if

_ FASB members support it

1 A 5 of 9

2 B 5 of 7

3 C 4 of 7

4 D None of these is correct.

The FASB's conceptual framework's qualitative characteristics

of accounting information include:

1 A Historical cost.

2 B Realization.

3 C Reliability.

4 D Full disclosure.

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 these are provisions of the Act.

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 primary professional organization for those accountants

working in industry is the:

1 A AAA

2 B AICPA

3 C IIA

4 D IMA

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.

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.

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.

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 likely important flaw leading to the demise of the APB

was the perceived lack of:

1 A Confidence.

2 B Competence.

3 C Independence.

4 D Importance.

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.

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.

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.

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 Full disclosure principle

CPAs are licensed by:

1 A The AICPA.

2 B The SEC.

3 C The federal government.

4 D State governments.

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.

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 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

4 D AICPA

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.

SFAC No.1 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.

The most political issue in the FASB's most recent deliberations

and pronouncements 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.

Which of the following groups is not among the external users

for whom financial statements are prepared?

1 A Customers

2 B Suppliers

3 C Employees

4 D All of these are external users of financial statements.

Which of the following has the authority to set accounting

standards in the United States?

1 A FASB

2 B IRS

3 C SEC

4 D AICPA

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

A firm's comprehensive income is always:

1 A The same as its net income.

2 B Greater than its net income.

3 C Less than its net income.

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

71 Free Test Bank for Intermediate Accounting 5th Edition

by Spiceland Multiple Choice Questions - Page 2

Revenue should not be recognized until:

1 A The earnings process is complete and collection is reasonably assured.

2 B Contracts have been signed and payment has been received.

3 C Work has been performed and customer has been billed.

4 D Collection has been made and warrantees have expired.

Primecoat could get 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.

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 Representational faithfulness.

4 D Timeliness.

Land was acquired in 2009 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.

Secondary qualitative characteristics of accounting information

include:

1 A Relevance and comparability.

2 B Comparability and consistency.

3 C Reliability and relevance.

4 D Reliability and consistency.

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 these is correct.

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 Representational faithfulness.

3 C Cost effectiveness.

4 D Materiality.

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.

Which of the following is not an identified valuation technique in

SFAS No 157?

1 A Cost approach.

2 B Market approach.

3 C Cost-benefit approach.

4 D Income approach.

Gains are:

1 A Inflows from selling a product or service to a customer.

2 B Increases in equity resulting from transfers of assets to the company from owners.

3 C Increases in equity from peripheral transactions of an entity.

4 D None of these.

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.

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 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.

Independent auditors express an opinion on the:

1 A Fairness of financial statements.

2 B Accuracy of financial statements.

3 C Soundness of a company's future.