Test bank for intermediate accounting 18th edition

market stability Under Statement of Financial Accounting Concepts No.. Financial Accounting Standards Board FASB Financial statements issued for the use of parties external to the enterp

Test Bank for Intermediate Accounting 18th Edition

Which of the following is NOT an implication of the going-concern assumption?

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

The following is a qualitative characteristic of accounting information:

1. a timeliness

2 b feedback value

3 c neutrality

4 d decision usefulness

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

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

The following is NOT one of the fundamental criteria for recognition?

1. a Timeliness

2 b Measurability

3 c Relevance

4 d Reliability

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

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

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

3 c economic entity assumption

4 d full disclosure principle

Enron’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

Under Statement of Financial Accounting Concepts No 2, representational faithfulness

is an ingredient of

1. A

2 B

3 C

4 D

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

1. a rules approach

2 b principles approach

3 c broad approach

4 d international approach

According to the FASB's conceptual framework, which of the following relates to both relevance and reliability?

1. A

2 B

3 C

4 D

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

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

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

1. a corporate tax

2 b management

3 c external

4 d international

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

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

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

For which of the following reporting issues has the FASB adopted substantially the same approach as the IASB?

1. a Segment reporting

2 b Earnings per share

3 c Statement of cash flows

4 d Pension plans

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)

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

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 is not included in the highest authoritative level of GAAP?

1. a FASB Statements

2 b AICPA Statements of Position

3 c FASB Staff Positions

4 d Accounting Principles Board (APB) Opinions

Financial disclosure statements are strictest in

1. a the United Kingdom

2 b Germany

3 c the United States

4 d France

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

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)

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

The following are users of accounting information:

1. a stakeholders

2 b creditors

3 c investors

4 d all of the above

Interested 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

The 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

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

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

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 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

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

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

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

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

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

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

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

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

Primary responsibility for GAAP and public reporting currently rests with the

1. a SEC

2 b FASB

3 c Congress

4 d AICPA

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

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 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 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

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

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

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 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

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

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

How many board members serve on the FASB?

1. a 5

2 b 7

3 c 14

4 d 20

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 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