Question 1

Unobservable values cannot be used to report the fair value of assets and liabilities in the financial statements.

Accepted Answer

A) True 
 B)False

Question 2

Recognition is the process of reporting an economic event in the financial statements.

Accepted Answer

A) True 
 B)False

Question 3

Under the concept of ________, capital is regarded in terms of the productive capacity of a company.

Accepted Answer

A)  physical capital maintenance 
B)  fiscal capital maintenance 
C)  financial capital maintenance 
D)  B or C 
A)  physical capital maintenance 
B)  fiscal capital maintenance 
C)  financial capital maintenance 
D)  B or C

Question 4

The cost constraint means that an item is not recognized in the financial statements unless its omission would significantly influence the judgment of an informed user.

Accepted Answer

A) True 
 B)False

Question 5

The major difference between cash and accrual accounting is the timing of revenue and expense recognition.

Accepted Answer

A) True 
 B)False

Question 6

Coffee Mugs Inc. is aware that a large portion of its receivables may become uncollectible because the customer is in talks for bankruptcy. By choosing not to disclose this information, the information provided in the statements ________.

Accepted Answer

A)  is not verifiable 
B)  does not faithfully represent the firm's financial position 
C)  Both A & B 
D)  Neither A nor B 
A)  is not verifiable 
B)  does not faithfully represent the firm's financial position 
C)  Both A & B 
D)  Neither A nor B

Question 7

According to the FASB's conceptual framework, gains include increases in equity from which of the following activities?

Accepted Answer

A)  $$\begin{array} { | c | c | } 
\hline \text { Investments by Owners } & \text { Peripheral Transactions } \
\hline \text { Yes } & \text { No } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Investments by Owners } & \text { Peripheral Transactions } \
\hline \text { Yes } & \text { Yes } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Investments by Owners } & \text { Peripheral Transactions } \
\hline \text { No } & \text { No } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | } 
\hline \text { Investments by Owners } & \text { Peripheral Transactions } \
\hline \text { No } & \text { Yes } \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | c | } 
\hline \text { Investments by Owners } & \text { Peripheral Transactions } \
\hline \text { Yes } & \text { No } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Investments by Owners } & \text { Peripheral Transactions } \
\hline \text { Yes } & \text { Yes } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Investments by Owners } & \text { Peripheral Transactions } \
\hline \text { No } & \text { No } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | } 
\hline \text { Investments by Owners } & \text { Peripheral Transactions } \
\hline \text { No } & \text { Yes } \
\hline
\end{array}$$

Question 8

Information exhibits the characteristic of faithful representation if it is complete, neutral, and free from error.

Accepted Answer

A) True 
 B)False

Question 9

Southeast Industries Inc. charges $185 per month for a storage unit. In the first quarter of the year, they collected $9,065. Ten customers pre-paid for three months rental in January, seven customers pre-paid for two months rental in February, and five customers paid for one month rental in March. Using the cash basis of accounting, Southeast will recognize ________ in revenue for January and ________ using the accrual basis.

Accepted Answer

A)  $9,065; $5,550 
B)  $5,550; $9,065 
C)  $1,850; $5,550 
D)  $5,550; $1,850 
A)  $9,065; $5,550 
B)  $5,550; $9,065 
C)  $1,850; $5,550 
D)  $5,550; $1,850

Question 10

The IFRS element capital maintenance is identical to the GAAP element comprehensive income.

Accepted Answer

A) True 
 B)False

Question 11

Which term is described as the building blocks of the financial statements?

Accepted Answer

A)  fundamental characteristics 
B)  enhancing characteristics 
C)  elements 
D)  assets 
A)  fundamental characteristics 
B)  enhancing characteristics 
C)  elements 
D)  assets

Question 12

What is the cost constraint and how does it affect financial reporting?

Accepted Answer

The conceptual framework stipulates that

Question 13

Identify the element, and whether it is point-in-time or period-of-time.

Accepted Answer

The answer of Identify the element, and whether it is...

Question 14

Under IFRS, revenue is recognized simultaneously with ________.

Accepted Answer

A)  increases in assets or increases in liabilities 
B)  decreases in assets or increases in liabilities 
C)  increases in assets or decreases in liabilities 
D)  decreases in assets or decreases in liabilities 
A)  increases in assets or increases in liabilities 
B)  decreases in assets or increases in liabilities 
C)  increases in assets or decreases in liabilities 
D)  decreases in assets or decreases in liabilities

Question 15

When the buyer and seller are unrelated and independent, the transaction is considered to be ________.

Accepted Answer

A)  a bad deal 
B)  an arms-length transaction 
C)  an independent contract 
D)  a bribe 
A)  a bad deal 
B)  an arms-length transaction 
C)  an independent contract 
D)  a bribe

Question 16

Which attribute of a fundamental characteristic makes explicit the assumption of the full disclosure principle?

Accepted Answer

A)  relevance 
B)  materiality 
C)  verifiability 
D)  completeness 
A)  relevance 
B)  materiality 
C)  verifiability 
D)  completeness

Question 17

Under IFRS, which of the following is not a criterion for recognizing items in the financial statements?

Accepted Answer

A)  The measurement of the item is reliable. 
B)  The item is relevant. 
C)  The item meets the definition of an element. 
D)  Economic benefits from the item are probable. 
A)  The measurement of the item is reliable. 
B)  The item is relevant. 
C)  The item meets the definition of an element. 
D)  Economic benefits from the item are probable.

Question 18

Shadow's Cleaning Service provides weekly cleaning services for $41 per week. In January, they collected payments from 60 customers for 3 months (12 weeks) of service each. For the month of January, they will recognize ________ of revenue under the cash basis, and ________ under the accrual basis.

Accepted Answer

A)  $2,460; $720 
B)  $3,180; $0 
C)  $9,840; $29,520 
D)  $29,520; $9,840 
A)  $2,460; $720 
B)  $3,180; $0 
C)  $9,840; $29,520 
D)  $29,520; $9,840

Question 19

List the three primary components of the conceptual framework for financial reporting and the two subcomponents of each component.

Accepted Answer

The primary components of the conceptual

Question 20

When deciding how to measure the fair value of an asset or liability, there is sometimes a trade-off between ________.

Accepted Answer

A)  understandability and comparability 
B)  faithful representation and neutrality 
C)  verifiability and neutrality 
D)  relevance and faithful representation 
A)  understandability and comparability 
B)  faithful representation and neutrality 
C)  verifiability and neutrality 
D)  relevance and faithful representation

Exam 2: Financial Reporting Theory

Unobservable values cannot be used to report the fair value of assets and liabilities in the financial statements.

Recognition is the process of reporting an economic event in the financial statements.

Under the concept of ________, capital is regarded in terms of the productive capacity of a company.

The cost constraint means that an item is not recognized in the financial statements unless its omission would significantly influence the judgment of an informed user.

The major difference between cash and accrual accounting is the timing of revenue and expense recognition.

Coffee Mugs Inc. is aware that a large portion of its receivables may become uncollectible because the customer is in talks for bankruptcy. By choosing not to disclose this information, the information provided in the statements ________.

According to the FASB's conceptual framework, gains include increases in equity from which of the following activities?

Information exhibits the characteristic of faithful representation if it is complete, neutral, and free from error.

The IFRS element capital maintenance is identical to the GAAP element comprehensive income.

Which term is described as the building blocks of the financial statements?

What is the cost constraint and how does it affect financial reporting?

Identify the element, and whether it is point-in-time or period-of-time.

Under IFRS, revenue is recognized simultaneously with ________.

When the buyer and seller are unrelated and independent, the transaction is considered to be ________.

Which attribute of a fundamental characteristic makes explicit the assumption of the full disclosure principle?

Under IFRS, which of the following is not a criterion for recognizing items in the financial statements?

Shadow's Cleaning Service provides weekly cleaning services for $41 per week. In January, they collected payments from 60 customers for 3 months (12 weeks) of service each. For the month of January, they will recognize ________ of revenue under the cash basis, and ________ under the accrual basis.

List the three primary components of the conceptual framework for financial reporting and the two subcomponents of each component.

When deciding how to measure the fair value of an asset or liability, there is sometimes a trade-off between ________.

The Financial Reporting Environment

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

Shadow's Cleaning Service provides weekly cleaning services for $41 per week. In January, they collected payments from 60 customers for 3 months (12 weeks) of service each. For the month of January, they will recognize of revenue under the cash basis, and under the accrual basis.