Question 1

Primary responsibility for GAAP and public reporting currently rests with the

Accepted Answer

A)  SEC. 
B)  FASB. 
C)  Congress. 
D)  AICPA. 
A)  SEC. 
B)  FASB. 
C)  Congress. 
D)  AICPA.

Question 2

Which of the following is not included in the highest authoritative level of GAAP?

Accepted Answer

A)  FASB Statements 
B)  AICPA Statements of Position 
C)  FASB Staff Positions 
D)  Accounting Principles Board (AP
B)  Opinions 
A)  FASB Statements 
B)  AICPA Statements of Position 
C)  FASB Staff Positions 
D)  Accounting Principles Board (AP
B)  Opinions

Question 3

A major difference between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is

Accepted Answer

A)  all members of the FASB serve full time, are paid a salary, and are independent of any public or private enterprises. 
B)  over 50 percent of the members of the FASB are required to be Certified Public Accountants. 
C)  the FASB issues exposure drafts of proposed standards. 
D)  all members of the FASB possess experience in both public and corporate accounting. 
A)  all members of the FASB serve full time, are paid a salary, and are independent of any public or private enterprises. 
B)  over 50 percent of the members of the FASB are required to be Certified Public Accountants. 
C)  the FASB issues exposure drafts of proposed standards. 
D)  all members of the FASB possess experience in both public and corporate accounting.

Question 4

Financial statements should provide information that is both relevant and reliable. The current model upon which financial statements are based is the historical cost model. Over the past fifty years, however, various individuals and groups have advocated the implementation of current value models of accounting. One such model represents the amount of cash for which an asset might be sold or a liability might be refinanced, sometimes referred as the current-exit-price approach. The current exit price is generally agreed to correspond (1) to the selling price under conditions of orderly rather than forced liquidation, and (2) to the selling price at the time of measurement. All assets and liabilities are thus revalued at their exit prices at each reporting date.
Required:
Evaluate the historical cost and current-exit-price models in terms of relevance and reliability.

Accepted Answer

The historical cost model generally is v

Question 5

The United States Securities and Exchange Commission

Accepted Answer

A)  has recognized IASB standards as an acceptable alternative to U.S. GAAP. 
B)  requires foreign companies listing their shares on U.S. stock exchanges to restate their financial statements to U.S. GAAP. 
C)  has barred foreign companies from listing their shares on U.S. stock exchanges. 
D)  has no jurisdiction in the United States over foreign companies listing their shares on U.S. stock exchanges. 
A)  has recognized IASB standards as an acceptable alternative to U.S. GAAP. 
B)  requires foreign companies listing their shares on U.S. stock exchanges to restate their financial statements to U.S. GAAP. 
C)  has barred foreign companies from listing their shares on U.S. stock exchanges. 
D)  has no jurisdiction in the United States over foreign companies listing their shares on U.S. stock exchanges.

Question 6

Which of the following is true?

Accepted Answer

A)  Form 10-K is required under the FASB Conceptual Framework. 
B)  Form 10-Q is a quarterly report of significant events required by the SEC. 
C)  Form 8-K is a quarterly report of significant events required by the SEC. 
D)  Form 8-K is the annual report submitted by small businesses to the SEC. 
A)  Form 10-K is required under the FASB Conceptual Framework. 
B)  Form 10-Q is a quarterly report of significant events required by the SEC. 
C)  Form 8-K is a quarterly report of significant events required by the SEC. 
D)  Form 8-K is the annual report submitted by small businesses to the SEC.

Question 7

The overriding qualitative characteristic of accounting information is

Accepted Answer

A)  relevance. 
B)  understandability. 
C)  reliability. 
D)  decision usefulness. 
A)  relevance. 
B)  understandability. 
C)  reliability. 
D)  decision usefulness.

Question 8

The International Accounting Standards Board was formed to

Accepted Answer

A)  enforce FASB standards in foreign countries. 
B)  develop worldwide accounting standards. 
C)  establish accounting standards for U.S. multinational companies. 
D)  develop accounting standards for countries that do not have their own standard-setting bodies. 
A)  enforce FASB standards in foreign countries. 
B)  develop worldwide accounting standards. 
C)  establish accounting standards for U.S. multinational companies. 
D)  develop accounting standards for countries that do not have their own standard-setting bodies.

Question 9

Congress

Accepted Answer

A)  has legally barred the SEC from interfering with the work of the FASB. 
B)  is restricted from holding hearings concerning the accounting profession. 
C)  gave the SEC the power to establish accounting principles for corporations whose stock is sold and traded to the general public. 
D)  appoints two of the five members of the FASB. 
A)  has legally barred the SEC from interfering with the work of the FASB. 
B)  is restricted from holding hearings concerning the accounting profession. 
C)  gave the SEC the power to establish accounting principles for corporations whose stock is sold and traded to the general public. 
D)  appoints two of the five members of the FASB.

Question 10

Many accountants argue that relevance and reliability often require trade-offs.
Define both relevance and reliability and explain what is meant by "trade-offs" between relevance and reliability. Include in your explanation a specific example of where trade-offs could occur.

Accepted Answer

Relevance is the capacity of information

Question 11

The primary current source of generally accepted accounting principles for nongovernmental operations is the

Accepted Answer

A)  American Institute of Certified Public Accountants. 
B)  Securities and Exchange Commission. 
C)  Financial Accounting Standards Board. 
D)  Governmental Accounting Standards Board. 
A)  American Institute of Certified Public Accountants. 
B)  Securities and Exchange Commission. 
C)  Financial Accounting Standards Board. 
D)  Governmental Accounting Standards Board.

Question 12

The journal Accounting Horizons is published by which of the following organizations?

Accepted Answer

A)  American Institute of Certified Public Accountants (AICP
A)  
B)  American Accounting Association (AA
A)  
C)  Securities and Exchange Commission (SE
C)  
D)  Financial Accounting Standards Board (FAS
B)  
A)  American Institute of Certified Public Accountants (AICP
A)  
B)  American Accounting Association (AA
A)  
C)  Securities and Exchange Commission (SE
C)  
D)  Financial Accounting Standards Board (FAS
B)

Question 13

The responsibility of the Emerging Issues Task Force (EITF) is to

Accepted Answer

A)  issue statements which reflect a consensus of the EITF on how to account for new financial reporting issues where guidance is needed quickly. 
B)  do research on financial reporting issues that are being addressed by the AICPA. 
C)  respond to groups lobbying the FASB on issues that affect a particular industry. 
D)  develop concept statements the AICPA can use as a frame of reference to solve future problems. 
A)  issue statements which reflect a consensus of the EITF on how to account for new financial reporting issues where guidance is needed quickly. 
B)  do research on financial reporting issues that are being addressed by the AICPA. 
C)  respond to groups lobbying the FASB on issues that affect a particular industry. 
D)  develop concept statements the AICPA can use as a frame of reference to solve future problems.

Question 14

Financial information exhibits the characteristic of consistency when

Accepted Answer

A)  accounting procedures are adopted which smooth net income and make results consistent between years. 
B)  extraordinary gains and losses are shown separately on the income statement. 
C)  accounting entities give similar events the same accounting treatment each period. 
D)  expenditures are reported as expenses and netted against revenue in the period in which they are paid. 
A)  accounting procedures are adopted which smooth net income and make results consistent between years. 
B)  extraordinary gains and losses are shown separately on the income statement. 
C)  accounting entities give similar events the same accounting treatment each period. 
D)  expenditures are reported as expenses and netted against revenue in the period in which they are paid.

Question 15

The overall objective of financial reporting is to provide information

Accepted Answer

A)  that is useful for decision making. 
B)  about an enterprise's assets, liabilities, and owners' equity. 
C)  about an enterprise's financial performance during a period. 
D)  that allows owners to assess management's performance. 
A)  that is useful for decision making. 
B)  about an enterprise's assets, liabilities, and owners' equity. 
C)  about an enterprise's financial performance during a period. 
D)  that allows owners to assess management's performance.

Question 16

Historical cost has been the valuation basis most commonly used in accounting because of its

Accepted Answer

A)  timelessness. 
B)  conservatism. 
C)  reliability. 
D)  accuracy. 
A)  timelessness. 
B)  conservatism. 
C)  reliability. 
D)  accuracy.

Question 17

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

Accepted Answer

A)  Segment reporting 
B)  Earnings per share 
C)  Statement of cash flows 
D)  Pension plans 
A)  Segment reporting 
B)  Earnings per share 
C)  Statement of cash flows 
D)  Pension plans

Question 18

Which of the following elements of financial statements is not a component of comprehensive income?

Accepted Answer

A)  Revenues 
B)  Expenses 
C)  Losses 
D)  Distributions to owners 
A)  Revenues 
B)  Expenses 
C)  Losses 
D)  Distributions to owners

Question 19

The assumed continuation of a business entity in the absence of evidence to the contrary is an example of the accounting concept of

Accepted Answer

A)  accrual. 
B)  consistency. 
C)  comparability. 
D)  going concern. 
A)  accrual. 
B)  consistency. 
C)  comparability. 
D)  going concern.

Question 20

Which of the following is not normally an objective of financial reporting?

Accepted Answer

A)  To provide information about an entity's assets and claims against those assets 
B)  To provide information that is useful in assessing an entity's sources and uses of cash 
C)  To provide information that is useful in lending and investing decisions 
D)  To provide information about an entity's liquidation value 
A)  To provide information about an entity's assets and claims against those assets 
B)  To provide information that is useful in assessing an entity's sources and uses of cash 
C)  To provide information that is useful in lending and investing decisions 
D)  To provide information about an entity's liquidation value

Exam 1: Financial Reporting

Primary responsibility for GAAP and public reporting currently rests with the

Which of the following is not included in the highest authoritative level of GAAP?

A major difference between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is

The United States Securities and Exchange Commission

Which of the following is true?

The overriding qualitative characteristic of accounting information is

The International Accounting Standards Board was formed to

Congress

Many accountants argue that relevance and reliability often require trade-offs. Define both relevance and reliability and explain what is meant by "trade-offs" between relevance and reliability. Include in your explanation a specific example of where trade-offs could occur.

The primary current source of generally accepted accounting principles for nongovernmental operations is the

The journal Accounting Horizons is published by which of the following organizations?

The responsibility of the Emerging Issues Task Force (EITF) is to

Financial information exhibits the characteristic of consistency when

The overall objective of financial reporting is to provide information

Historical cost has been the valuation basis most commonly used in accounting because of its

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

Which of the following elements of financial statements is not a component of comprehensive income?

The assumed continuation of a business entity in the absence of evidence to the contrary is an example of the accounting concept of

Which of the following is not normally an objective of financial reporting?

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

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