Question 1

________ include(s) all changes in equity during a period except those resulting from transactions with owners.

Accepted Answer

A)  Performance 
B)  Revenues 
C)  Comprehensive income 
D)  Period-of-time elements 
A)  Performance 
B)  Revenues 
C)  Comprehensive income 
D)  Period-of-time elements

Question 2

Which of the following statements is not true about distributions to owners?

Accepted Answer

A)  Distributions to owners represent a decrease in equity. 
B)  Distributions to owners result from incurring liabilities by the enterprise to owners. 
C)  Distributions to owners are included in other comprehensive income. 
D)  Distributions to owners result from rendering services by the enterprise to owners. 
A)  Distributions to owners represent a decrease in equity. 
B)  Distributions to owners result from incurring liabilities by the enterprise to owners. 
C)  Distributions to owners are included in other comprehensive income. 
D)  Distributions to owners result from rendering services by the enterprise to owners.

Question 3

Identify the assumption represented in each scenario, and then decide if it is satisfied or violated.
 $$\begin{array} { | l | l | l | } 
\hline \text { Scenario } & \text { Assumption } & \text { Satisfied or violated? } \
\hline \text { Harold Inc. adjusted the } & & \
\text { valuation of balance sheet } & & \
\text { tems to keep up with } & & \
\text { changes in inflation. } & & \
\hline \text { Campers Inc. is facing } & & \
\text { bankruptcy - they choose } & & \
\text { not to list assets and } & & \
\text { liabilities at liquidation } & & \
\text { values on the balance sheet. } & & \
\hline \text { Template Co. issues } & & \
\text { quarterly and annual } & & \
\text { financial statements to } & & \
\text { external users. } & & \
\hline \text { Texas Studio's president } & & \
\text { prly uses the company limo } & & \
\text { for business purposes. } & & \
\hline
\end{array}$$

Accepted Answer

None

Question 4

The primary distinction between expenses and losses is ________.

Accepted Answer

A)  the verifiability of the transactions 
B)  the nature of the activities that bring about the transactions 
C)  the timing of the transactions 
D)  the amount and materiality of the transactions 
A)  the verifiability of the transactions 
B)  the nature of the activities that bring about the transactions 
C)  the timing of the transactions 
D)  the amount and materiality of the transactions

Question 5

Which underlying assumption presumes that the owner's personal residence should not be included as an asset on the company balance sheet?

Accepted Answer

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

Question 6

Which of the following types of information is not a focus of the primary objective of financial reporting?

Accepted Answer

A)  information that helps a banker decide to provide a loan 
B)  information that helps a manager assess the efficiency and effectiveness of operations 
C)  information that helps a creditor evaluate the amount and timing of cash flows of its customers 
D)  information that helps an investor form an opinion about a company's future cash flows 
A)  information that helps a banker decide to provide a loan 
B)  information that helps a manager assess the efficiency and effectiveness of operations 
C)  information that helps a creditor evaluate the amount and timing of cash flows of its customers 
D)  information that helps an investor form an opinion about a company's future cash flows

Question 7

The IFRS element income relates to which U.S. GAAP element(s)?

Accepted Answer

A)  comprehensive income 
B)  capital maintenance 
C)  revenues and expenses 
D)  revenues and gains 
A)  comprehensive income 
B)  capital maintenance 
C)  revenues and expenses 
D)  revenues and gains

Question 8

Financial statements should provide all financial information that is relevant and faithfully representative within the limitations of the ________ constraint.

Accepted Answer

A)  benefit 
B)  materiality 
C)  usefulness 
D)  cost 
A)  benefit 
B)  materiality 
C)  usefulness 
D)  cost

Question 9

Hanker LLC uses the accrual basis to keep his accounting records. During 2018, he collected $374,000 from clients. At December 31, 2017 he had accounts receivable of $139,000. At December 31, 2018 he had accounts receivable of $164,000 and unearned revenue of $41,000. What did Hanker LLC earn in service revenue for 2018 using the accrual basis of accounting?

Accepted Answer

A)  $194,000 
B)  $308,000 
C)  $349,000 
D)  $358,000 
A)  $194,000 
B)  $308,000 
C)  $349,000 
D)  $358,000

Question 10

IFRS identifies ________ point-in-time elements.

Accepted Answer

A)  one 
B)  three 
C)  five 
D)  seven 
A)  one 
B)  three 
C)  five 
D)  seven

Question 11

________ are restatements or revaluations of reported amounts of assets and liabilities that companies usually report in other comprehensive income.

Accepted Answer

A)  Financial maintenance entries 
B)  Capital maintenance adjustments 
C)  Physical maintenance entries 
D)  Comprehensive maintenance adjustments 
A)  Financial maintenance entries 
B)  Capital maintenance adjustments 
C)  Physical maintenance entries 
D)  Comprehensive maintenance adjustments

Question 12

What is the primary purpose of the conceptual framework?

Accepted Answer

A)  to override accounting standards 
B)  to assist standard setters in developing and revising accounting standards 
C)  to revise the objective of financial reporting 
D)  All of the above 
A)  to override accounting standards 
B)  to assist standard setters in developing and revising accounting standards 
C)  to revise the objective of financial reporting 
D)  All of the above

Question 13

Southcoast Warehousing Inc. reported earnings per share of $3.41. This surpassed the average analyst forecast of $2.90. This information has ________ to users of financial information.

Accepted Answer

A)  confirmatory value 
B)  comparable value 
C)  consistent value 
D)  Both A & C 
A)  confirmatory value 
B)  comparable value 
C)  consistent value 
D)  Both A & C

Question 14

All of the following are enhancing characteristics except ________.

Accepted Answer

A)  understandability 
B)  verifiability 
C)  consistency 
D)  comparability 
A)  understandability 
B)  verifiability 
C)  consistency 
D)  comparability

Question 15

Which of the following is not a purpose of FASB's conceptual framework?

Accepted Answer

A)  aid in development of new standards 
B)  support understanding of accounting standards 
C)  assist with revision of accounting standards 
D)  override existing accounting standards 
A)  aid in development of new standards 
B)  support understanding of accounting standards 
C)  assist with revision of accounting standards 
D)  override existing accounting standards

Question 16

U.S. GAAP and IFRS set forth the same objective of financial reporting and the same qualitative characteristics in their respective conceptual frameworks.

Accepted Answer

A) True 
 B)False

Question 17

IFRS includes all of the following bases of measurement except ________.

Accepted Answer

A)  present value of future cash flows 
B)  historical cost 
C)  current market value 
D)  net realizable value 
A)  present value of future cash flows 
B)  historical cost 
C)  current market value 
D)  net realizable value

Question 18

Complete the following table - identify which enhancing characteristic is indicated in each independent scenario and whether it was satisfied or violated.
 $\begin{array}{|l|l|l|}
\hline\text{ Scenario } & \text{ Enhancing Characteristics} & \text{ Satisfied or Violated }\
\hline \text{ Search Engine Corporation} & & \
\text{ reports the historical cost of its} & & \
\text{ archery park on the balance} & & \
\text{ sheet.} & & \
\hline \text{ Creighton's Fine Products} & & \ 
\text{ produces very basic financial} & & \
\text{ statements, without }& & \
\text{ classification or notes. They do} & & \
\text{ have complicated lease and }& \
\text{ borrowing agreements, and }& \
\text{ have changed depreciation} & \
\text{ estimates. }& \
\hline\text{  Realistic Ventures Company} & & \
\text{ switched to fair value} & \
\text{ accounting for standing timber,} & & \
\text{ which is the method used by }& & \
\text{ most companies in the industry. }& & \
\hline \text{ Roy \& Quinn's Lakeside }& & \
\text{ Properties provides financial} & & \
\text{ statement information every} & & \
\text{ other year.} & &\
\hline
\end{array}$

Accepted Answer

None

Question 19

Which of the following terms describe probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events?

Accepted Answer

A)  performance 
B)  income 
C)  equity 
D)  asset 
A)  performance 
B)  income 
C)  equity 
D)  asset

Question 20

Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the ________.

Accepted Answer

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

Exam 2: Financial Reporting Theory

________ include(s) all changes in equity during a period except those resulting from transactions with owners.

Which of the following statements is not true about distributions to owners?

The primary distinction between expenses and losses is ________.

Which underlying assumption presumes that the owner's personal residence should not be included as an asset on the company balance sheet?

Which of the following types of information is not a focus of the primary objective of financial reporting?

The IFRS element income relates to which U.S. GAAP element(s)?

Financial statements should provide all financial information that is relevant and faithfully representative within the limitations of the ________ constraint.

IFRS identifies ________ point-in-time elements.

________ are restatements or revaluations of reported amounts of assets and liabilities that companies usually report in other comprehensive income.

What is the primary purpose of the conceptual framework?

Southcoast Warehousing Inc. reported earnings per share of $3.41. This surpassed the average analyst forecast of $2.90. This information has ________ to users of financial information.

All of the following are enhancing characteristics except ________.

Which of the following is not a purpose of FASB's conceptual framework?

U.S. GAAP and IFRS set forth the same objective of financial reporting and the same qualitative characteristics in their respective conceptual frameworks.

IFRS includes all of the following bases of measurement except ________.

Which of the following terms describe probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events?

Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the ________.

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

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