Question 1

How many board members serve on the FASB?

Accepted Answer

A)  5 
B)  7 
C)  14 
D)  20 
A)  5 
B)  7 
C)  14 
D)  20 A

Question 2

Primary responsibility for the preparation of financial statements in accordance with generally accepted accounting principles rests with

Accepted Answer

A)  the internal auditors. 
B)  management. 
C)  the external auditors. 
D)  the board of directors. 
A)  the internal auditors. 
B)  management. 
C)  the external auditors. 
D)  the board of directors. B

Question 3

Which of the following statements concerning the objectives of financial reporting is correct?

Accepted Answer

A)  The objectives are intended to be specific in nature. 
B)  The objectives are directed primarily toward the needs of internal users of accounting information. 
C)  The objectives were the end result of the FASB's conceptual framework project. 
D)  The objectives encompass not only financial statement disclosures, but other information as well. 
A)  The objectives are intended to be specific in nature. 
B)  The objectives are directed primarily toward the needs of internal users of accounting information. 
C)  The objectives were the end result of the FASB's conceptual framework project. 
D)  The objectives encompass not only financial statement disclosures, but other information as well. D

Question 4

Which of the following measurement attributes is not currently used in practice?

Accepted Answer

A)  Present value 
B)  Net realizable value 
C)  Current replacement cost 
D)  Inflation-adjusted cost 
A)  Present value 
B)  Net realizable value 
C)  Current replacement cost 
D)  Inflation-adjusted cost

Question 5

In providing information with the qualitative characteristics that render the information useful, the constraint of materiality may affect what is included and excluded from the financial information reported.
Explain the concept of materiality.

Accepted Answer

An item is material if its inclusion or

Question 6

Prior to 1973, generally accepted accounting principles were established

Accepted Answer

A)  by the Financial Accounting Foundation. 
B)  by the Securities and Exchange Commission. 
C)  under the direction of the American Institute of Certified Public Accountants. 
D)  by the individual states. 
A)  by the Financial Accounting Foundation. 
B)  by the Securities and Exchange Commission. 
C)  under the direction of the American Institute of Certified Public Accountants. 
D)  by the individual states.

Question 7

Much of the controversy surrounding the Enron scandal centered on the use of special purpose entities by Enron management.
Briefly explain what a special purpose entity is and identify two ways in which Enron abused the accounting rules for SPEs.

Accepted Answer

A special purpose entity (SPE) is a thin

Question 8

Under Statement of Financial Accounting Concepts No. 2, representational faithfulness is an ingredient of
Relevance $\quad \underline { \text { Reliability } }$
A. Yes $\quad$$\quad$$\quad$Yes
B. Yes$\quad$$\quad$$\quad$ No
C. No $\quad$$\quad$$\quad$No
D. No $\quad$$\quad$$\quad$Yes

Accepted Answer

The answer of Under Statement of Financial Accounting Concepts No....

Question 9

What accounting concept justifies the use of accruals and deferrals?

Accepted Answer

A)  Going-concern assumption 
B)  Corporate form of organization 
C)  Consistency characteristic 
D)  Arm's-length transactions 
A)  Going-concern assumption 
B)  Corporate form of organization 
C)  Consistency characteristic 
D)  Arm's-length transactions

Question 10

Form 10-K is submitted to the

Accepted Answer

A)  FASB. 
B)  GASB. 
C)  IRS. 
D)  SEC. 
A)  FASB. 
B)  GASB. 
C)  IRS. 
D)  SEC.

Question 11

The term "due process" is used in various settings to describe the steps taken to ensure that an administrative matter receives the consideration required to adequately protect the interests of those involved. Due process is an integral part of the legal and legislative processes, for example.
The Financial Accounting Standards Board (FASB) also uses a set of due process procedures to ensure that the interests of its constituents are considered in the development of accounting standards.
Required:
Identify the steps in the set of due process procedures used by the FASB.

Accepted Answer

The following repres

Question 12

When a large number of individuals, using the same measurement method, demonstrate that a high degree of consensus can be secured among independent measurers, then the result exhibits the characteristic of

Accepted Answer

A)  verifiability. 
B)  neutrality. 
C)  relevance. 
D)  reliability. 
A)  verifiability. 
B)  neutrality. 
C)  relevance. 
D)  reliability.

Question 13

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

Accepted Answer

A)  realization. 
B)  recognition. 
C)  matching. 
D)  allocation. 
A)  realization. 
B)  recognition. 
C)  matching. 
D)  allocation.

Question 14

When the FASB deliberates about an accounting standard, firms whose financial statements would be affected by that standard

Accepted Answer

A)  are legally barred from lobbying the FASB. 
B)  are not allowed to lobby the FASB if the standard would have a negative impact on their financial statements. 
C)  are not allowed to lobby the FASB if the standard would have a positive impact on their financial statements. 
D)  are free to lobby for or against the standard. 
A)  are legally barred from lobbying the FASB. 
B)  are not allowed to lobby the FASB if the standard would have a negative impact on their financial statements. 
C)  are not allowed to lobby the FASB if the standard would have a positive impact on their financial statements. 
D)  are free to lobby for or against the standard.

Question 15

The secondary qualitative characteristics of accounting information are

Accepted Answer

A)  relevance and reliability. 
B)  comparability and consistency. 
C)  understandability and decision usefulness. 
D)  materiality and conservatism. 
A)  relevance and reliability. 
B)  comparability and consistency. 
C)  understandability and decision usefulness. 
D)  materiality and conservatism.

Question 16

Which of the following items is nota modifying convention?

Accepted Answer

A)  Matching 
B)  Materiality 
C)  Industry practices 
D)  Conservatism 
A)  Matching 
B)  Materiality 
C)  Industry practices 
D)  Conservatism

Question 17

Management accounting is the area of accounting that emphasizes

Accepted Answer

A)  reporting financial information to external users. 
B)  reporting to the SEC. 
C)  combining accounting knowledge with an expertise in data processing. 
D)  developing accounting information for use within a company. 
A)  reporting financial information to external users. 
B)  reporting to the SEC. 
C)  combining accounting knowledge with an expertise in data processing. 
D)  developing accounting information for use within a company.

Question 18

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

Accepted Answer

A)  The historical cost principle is credible. 
B)  Depreciation and amortization policies are justifiable and appropriate. 
C)  The current/noncurrent classification of assets and liabilities is justifiable and significant. 
D)  Amortizing research and development costs over multiple periods is justifiable and appropriate. 
A)  The historical cost principle is credible. 
B)  Depreciation and amortization policies are justifiable and appropriate. 
C)  The current/noncurrent classification of assets and liabilities is justifiable and significant. 
D)  Amortizing research and development costs over multiple periods is justifiable and appropriate.

Question 19

Which of the following is not one of the fundamental criteria for recognition?

Accepted Answer

A)  Timeliness 
B)  Measurability 
C)  Relevance 
D)  Reliability 
A)  Timeliness 
B)  Measurability 
C)  Relevance 
D)  Reliability

Question 20

Financial statements issued for the use of parties external to the enterprise are the primary responsibility of the

Accepted Answer

A)  management of the enterprise. 
B)  stockholders of the enterprise. 
C)  independent auditors of the enterprise. 
D)  creditors of the enterprise. 
A)  management of the enterprise. 
B)  stockholders of the enterprise. 
C)  independent auditors of the enterprise. 
D)  creditors of the enterprise.

Exam 1: Financial Reporting

How many board members serve on the FASB?

Primary responsibility for the preparation of financial statements in accordance with generally accepted accounting principles rests with

Which of the following statements concerning the objectives of financial reporting is correct?

Which of the following measurement attributes is not currently used in practice?

In providing information with the qualitative characteristics that render the information useful, the constraint of materiality may affect what is included and excluded from the financial information reported. Explain the concept of materiality.

Prior to 1973, generally accepted accounting principles were established

Much of the controversy surrounding the Enron scandal centered on the use of special purpose entities by Enron management. Briefly explain what a special purpose entity is and identify two ways in which Enron abused the accounting rules for SPEs.

Under Statement of Financial Accounting Concepts No. 2, representational faithfulness is an ingredient of Relevance Reliability ‾\quad \underline { \text { Reliability } } Reliability ​ A. Yes \quad\quad\quad Yes B. Yes \quad\quad\quad No C. No \quad\quad\quad No D. No \quad\quad\quad Yes

What accounting concept justifies the use of accruals and deferrals?

Form 10-K is submitted to the

When a large number of individuals, using the same measurement method, demonstrate that a high degree of consensus can be secured among independent measurers, then the result exhibits the characteristic of

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

When the FASB deliberates about an accounting standard, firms whose financial statements would be affected by that standard

The secondary qualitative characteristics of accounting information are

Which of the following items is nota modifying convention?

Management accounting is the area of accounting that emphasizes

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

Which of the following is not one of the fundamental criteria for recognition?

Financial statements issued for the use of parties external to the enterprise are the primary responsibility of the

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Under Statement of Financial Accounting Concepts No. 2, representational faithfulness is an ingredient of Relevance $\quad \underline { \text { Reliability } }$ A. Yes $\quad$ $\quad$ $\quad$ Yes B. Yes $\quad$ $\quad$ $\quad$ No C. No $\quad$ $\quad$ $\quad$ No D. No $\quad$ $\quad$ $\quad$ Yes