118 test bank for intermediate accounting 8th

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118 Test Bank for Intermediate Accounting 8th

True - False Questions

The FASB’s framework for measuring fair value doesn’t change

the situations in which fair value is used under current GAAP

1 True

2 False

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

accounting standards in the United States

1 True

2 False

According to the FASB’s Statements of Financial Accounting

Concepts, conservatism is a desired qualitative

characteristic of accounting information

1 True

2 False

The FASB’s due process invites various interested parties to

indicate their opinions about whether financial accounting standards should be changed

1 True

2 False

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

the assets of the business

1 True

2 False

The purpose of the conceptual framework is to provide a

structure and framework for a consistent set of GAAP

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

The revenue/expense approach emphasizes determining the

appropriate amounts of revenue and expense in each reporting period

1 True

2 False

In IFRS, the conceptual framework indicates appropriate

accounting when a more specific accounting standard does not apply

The FASB’s conceptual framework lists relevance and

timeliness as the two fundamental qualitative

characteristics of decision useful information

1 True

2 False

The asset/liability approach emphasizes matching to determine

what assets and liabilities should be reflected on the balance sheet

1 True

2 False

Auditors play an important role in the resource allocation

process by adding credibility to financial statements

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

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

nature of the item, or both

1 True

2 False

The monetary unit assumption requires that items in financial

statements be measured in a particular monetary unit

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

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

The periodicity assumption requires that present value

calculations take into account the number of

compounding periods in each year

1 True

2 False

In the United States the conceptual framework indicates GAAP

when a more specific accounting standard does not

apply

1 True

2 False

The FASB is currently the public-sector organization

responsible for setting accounting standards in the

United States

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

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 funding of the standard-setting bodies that promulgate

IFRS is as independent as that underlying U.S GAAP

1 True

2 False

Accounting for stock-based compensation is an area in which

the FASB has received little political interference

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

Multiple Choice Questions - Page 1

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.

4 d.Quality of a company's management.

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.

The most likely important flaw leading to the demise of the APB

was the perceived lack of:

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.

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.

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.

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 (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.

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 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.

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

The primary focus for financial accounting information is to

provide information useful for:Investing decisions; Credit decisions (respectively)

1 a.Yes Yes

2 b.Yes No

3 c.No Yes

4 d.No No

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.

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 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.

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.

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.

Which of the following has the statutory authority to set

accounting standards in the United States?

1 a.FASB.

2 b.IRS.

3 c.SEC.

4 d.AICPA.

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.

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.

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 FASB's conceptual framework's qualitative characteristics

of accounting information include:

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.

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.

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.

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.Customers, suppliers, and employees are all external users of financial statements.

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 is not a concern expressed by the SEC

regarding IFRS adoption by the U.S.?

1 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 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.

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 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.

Corporations issue their shares to the investing public in the:

Primary market; Secondary market (respectively)

1 a.Yes Yes

2 b.No Yes

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.

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.

80 Free Test Bank for Intermediate Accounting 8th 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.

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.

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.

Enhancing qualitative characteristics of accounting information

include each of the following except:

1 a.Timeliness.

2 b.Materiality.

3 c.Comparability.

4 d.Verifiability.

The recognition of which of the following expenses exemplifies

the application of matching expenses with the revenues they produced?

1 a.President’s salary.

2 b.Research and development.

3 c.Cost of goods sold.

4 d.Advertising.

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.

The assumption that in the absence of contrary information a

business entity will continue indefinitely is the:

1 a.Periodicity assumption.

2 b.Entity assumption.

3 c.Going concern assumption.