Question 1

Which of the following is a period-of-time element?

Accepted Answer

A)  Liabilities 
B)  Equity 
C)  Assets 
D)  Gains 
A)  Liabilities 
B)  Equity 
C)  Assets 
D)  Gains

Question 2

Which of the following is a characteristic of faithful representation?

Accepted Answer

A)  timely 
B)  comparable 
C)  material 
D)  complete 
A)  timely 
B)  comparable 
C)  material 
D)  complete

Question 3

When developing a new proposed accounting standard, after FASB has determined that the proposed standard meets the objective of financial reporting, the next step in the development process is to ________.

Accepted Answer

A)  determine which elements of the financial statements are affected by the proposed standard 
B)  consider whether the proposed standard possesses the qualitative characteristics that make accounting information useful 
C)  weigh constraints on issuing the new standard, which may deter requiring the new standards 
D)  identify recognition and measurement concepts used to support the proposed standard 
A)  determine which elements of the financial statements are affected by the proposed standard 
B)  consider whether the proposed standard possesses the qualitative characteristics that make accounting information useful 
C)  weigh constraints on issuing the new standard, which may deter requiring the new standards 
D)  identify recognition and measurement concepts used to support the proposed standard

Question 4

What is the purpose of the conceptual framework?

Accepted Answer

The purpose of the conceptual

Question 5

Identify the assumption represented in each scenario, and then decide if it is satisfied or violated.
 $$\begin{array} { | l | l | l | } 
\hline \text { Scenario } & \text { Assumption } & \text { Satisfied or violated? } \
\hline \text { Extensive Products } & & \
\text { Corporation is a publicly } & & \
\text { traded company. They only } & & \
\text { ssue financial statements to } & & \
\text { external users every other } & & \
\text { year. } & & \
\hline \text { Creative Merchandise Inc. } & & \
\text { adds the cost of land } & & \
\text { purchased in 2014 to the } & & \
\text { balance of land purchased in } & & \
\text { 2000. } & & \
\hline \text { Gary Corp pays the CEO's } & & \
\text { mortgage and records it as } & & \
\text { miscellaneous expense. } & & \
\hline \text { Tackson \& Company } & & \
\text { depreciates property, plant, } & & \
\text { and equipment over their } & & \
\hline \text { useful lives. } & & \
\hline
\end{array}$$

Accepted Answer

None

Question 6

The conceptual framework assists with ________.

Accepted Answer

A)  the development of a set of standards which provide absolute answers for accounting questions 
B)  the development of a set of standards for auditors to use when looking for material misstatements or fraud 
C)  the development of a set of standards which ensure that accounting standards are coherent and uniform 
D)  All of the above 
A)  the development of a set of standards which provide absolute answers for accounting questions 
B)  the development of a set of standards for auditors to use when looking for material misstatements or fraud 
C)  the development of a set of standards which ensure that accounting standards are coherent and uniform 
D)  All of the above

Question 7

Perfect Tournaments Inc. (PTI), a sports venue in Atlanta, Georgia that has gross sales of over $30 million a year, has added a check box to the registration form that allows it to retain sports statistics from all the games and as a result of the performance of all participants (players) who compete in its amateur tournaments. The rights do not cost the company anything; however, there is some debate as to whether acquiring and retaining this information offers value to PTI. The controller has asked for the advice of experts and believes that the current database of statistics would have a market value of no more than $1,000. There is speculation that at some point in the future, such statistical information may have some significant value but that is not currently the case. As a result, the controller has decided not to disclose the value of the information rights on the balance sheet or in the notes to the financial statements. Explain what may have guided his decision.

Accepted Answer

Even those a case might be made that the

Question 8

Under the new revenue standard, what drives the measurement and timing of revenue recognition?

Accepted Answer

Companies should recognize revenue when

Question 9

Information that is reported free from error ________.

Accepted Answer

A)  contains no mistakes or omissions in the description of an event or in the process used to produce financial information 
B)  is accurate in all respects 
C)  does not include estimates 
D)  All of the above 
A)  contains no mistakes or omissions in the description of an event or in the process used to produce financial information 
B)  is accurate in all respects 
C)  does not include estimates 
D)  All of the above

Question 10

Baxter Company issues its annual financial reports within one month of the end of the year. This is an example of which enhancing quality of accounting information?

Accepted Answer

A)  confirmatory value 
B)  relevance 
C)  verifiability 
D)  timeliness 
A)  confirmatory value 
B)  relevance 
C)  verifiability 
D)  timeliness

Question 11

Under U.S. GAAP, comprehensive income includes which of the following?

Accepted Answer

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

Question 12

U.S. GAAP identifies ________ period-in-time elements.

Accepted Answer

A)  four 
B)  five 
C)  six 
D)  seven 
A)  four 
B)  five 
C)  six 
D)  seven

Question 13

Which of the following is not an underlying assumption in U.S. GAAP financial reporting?

Accepted Answer

A)  economic entity concept 
B)  monetary unit assumption 
C)  reliability concept 
D)  periodicity assumption 
A)  economic entity concept 
B)  monetary unit assumption 
C)  reliability concept 
D)  periodicity assumption

Question 14

IFRS does not treat transactions with owners as separate elements.

Accepted Answer

A) True 
 B)False

Question 15

Following U.S. GAAP, the going concern concept justifies accounting practices such as depreciation.

Accepted Answer

A) True 
 B)False

Question 16

Currently the FASB and IASB have two separate conceptual frameworks which are partially converged.

Accepted Answer

A) True 
 B)False

Question 17

According to IFRS, period-of-time elements include income, expenses, performance, and transactions with owners.

Accepted Answer

A) True 
 B)False

Question 18

When comparing FASB's Conceptual Framework to the IASB's Conceptual Framework, ________.

Accepted Answer

A)  the objective and qualitative characteristics are identical 
B)  they differ in the descriptions of elements of financial reporting 
C)  they differ in the principles of recognition and measurement 
D)  All of the above 
A)  the objective and qualitative characteristics are identical 
B)  they differ in the descriptions of elements of financial reporting 
C)  they differ in the principles of recognition and measurement 
D)  All of the above

Question 19

The following events took place at Forrest's Tree Service during the first quarter of the year. Determine Forrest's net income for each month, including a quarterly total, under both the cash and accrual bases of accounting.
a. Performed tree services in January - billed clients for $5,000.
b. Monthly saw sharpening - January, February, March - paid $500 per month.
c. Collected $2,500 from January clients on February 10th.
d. Performed tree services in February - billed clients for $8,000.
e. Employees are paid every other month; salary expense is $5,000 per month - paid on February 28.
f. Performed tree services in March - billed clients for $10,000 - also collected remaining January balance and $5,000 due from February.

Accepted Answer

\[\begin{array} { | l | r | r | r | r |

Question 20

________ are identical under U.S. GAAP and IFRS.

Accepted Answer

A)  Elements and Recognition 
B)  Presentation and Disclosure 
C)  Objective and Qualitative Characteristics 
D)  Subjective and Quantitative Characteristics 
A)  Elements and Recognition 
B)  Presentation and Disclosure 
C)  Objective and Qualitative Characteristics 
D)  Subjective and Quantitative Characteristics

Exam 2: Financial Reporting Theory

Which of the following is a period-of-time element?

Which of the following is a characteristic of faithful representation?

When developing a new proposed accounting standard, after FASB has determined that the proposed standard meets the objective of financial reporting, the next step in the development process is to ________.

What is the purpose of the conceptual framework?

The conceptual framework assists with ________.

Under the new revenue standard, what drives the measurement and timing of revenue recognition?

Information that is reported free from error ________.

Baxter Company issues its annual financial reports within one month of the end of the year. This is an example of which enhancing quality of accounting information?

Under U.S. GAAP, comprehensive income includes which of the following?

U.S. GAAP identifies ________ period-in-time elements.

Which of the following is not an underlying assumption in U.S. GAAP financial reporting?

IFRS does not treat transactions with owners as separate elements.

Following U.S. GAAP, the going concern concept justifies accounting practices such as depreciation.

Currently the FASB and IASB have two separate conceptual frameworks which are partially converged.

According to IFRS, period-of-time elements include income, expenses, performance, and transactions with owners.

When comparing FASB's Conceptual Framework to the IASB's Conceptual Framework, ________.

________ are identical under U.S. GAAP and IFRS.

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