Question 1

The primary function of financial accounting is to provide relevant financial information to parties external to business enterprises.

Accepted Answer

true

Question 2

Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow.

Accepted Answer

false

Question 3

The FASB is currently the public-sector organization responsible for setting accounting standards in the United States

Accepted Answer

false

Question 4

The FASB\'s due process invites various interested parties to indicate their opinions about whether financial accounting standards should be changed.

Accepted Answer

true

Question 5

Accounting for stock-based compensation is an area in which the FASB has received little political interference.

Accepted Answer

false

Question 6

The Public Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) changed the entity responsible for setting auditing standards in the United States

Accepted Answer

true

Question 7

A rules-based approach to standard-setting stresses professional judgment as opposed to following a list of rules.

Accepted Answer

false

Question 8

Under federal securities laws, the SEC has the authority to set accounting standards in the United States.

Accepted Answer

true

Question 9

The primary responsibility for properly applying GAAP when communicating with investors and creditors through financial statements lies with a firm\'s auditors.

Accepted Answer

false

Question 10

Auditors play an important role in the resource allocation process by adding credibility to financial statements.

Accepted Answer

true

Question 11

The purpose of the conceptual framework is to provide a structure and framework for a consistent set of GAAP.

Accepted Answer

true

Question 12

In the United States the conceptual framework indicates GAAP when a more specific accounting standard does not apply.

Accepted Answer

false

Question 13

Materiality can be affected by the dollar amount of an item, the nature of the item, or both

Accepted Answer

true

Question 14

According to the FASB\'s Statements of Financial Accounting Concepts, conservatism is a desired qualitative characteristic of accounting information.

Accepted Answer

false

Question 15

Equity is a residual amount representing the owner\'s interest in the assets of the business

Accepted Answer

true

Question 16

Revenues are inflows or other enhancements of assets or settlements of liabilities from activities that constitute the entity\'s ongoing operations.

Accepted Answer

true

Question 17

Gains or losses result, respectively, from the disposition of business assets for greater than, or less than, their book values.

Accepted Answer

true

Question 18

Comprehensive income is another term for net income.

Accepted Answer

false

Question 19

The FASB\'s conceptual framework lists relevance and timeliness as the two fundamental qualitative characteristics of decision useful information.

Accepted Answer

false

Question 20

The monetary unit assumption requires that items in financial statements be measured in a particular monetary unit.

Accepted Answer

true

Question 21

The periodicity assumption requires that present value calculations take into account the number of compounding periods in each year.

Accepted Answer

false

Question 22

Determining fair value by calculating the present value of future cash flows is a level 1 type of input.

Accepted Answer

false

Question 23

The FASB\'s framework for measuring fair value doesn\'t change the situations in which fair value is used under current GAAP.

Accepted Answer

true

Question 24

The revenue/expense approach emphasizes determining the appropriate amounts of revenue and expense in each reporting period.

Accepted Answer

true

Question 25

The asset/liability approach emphasizes matching to determine what assets and liabilities should be reflected on the balance sheet.

Accepted Answer

false

Question 26

In IFRS, the conceptual framework indicates appropriate accounting when a more specific accounting standard does not apply.

Accepted Answer

true

Question 27

The funding of the standard-setting bodies that promulgate IFRS is as independent as that underlying U.S. GAAP.

Accepted Answer

false

Question 28

External decision makers would not look primarily to financial accounting information to assist them in making decisions on:

Accepted Answer

capital budgeting

Question 29

Which of the following groups is not among the external users for whom financial statements are prepared?

Accepted Answer

customers, suppliers, and employees are all external users of financial statements

Question 30

Which of the following is not true about net operating cash flow?

Accepted Answer

It is a measure used in accrual accounting and is recognized as the best predictor of future operating cash flows.

Question 31

Which of the following groups is not among financial intermediaries

Accepted Answer

cpa

Question 32

Which of the following was the first private-sector entity that set accounting standards in the United States?

Accepted Answer

Committee on Accounting Procedure.

Question 33

Which of the following does not apply to secondary markets?

Accepted Answer

New resources are provided when shares of stock are sold by the corporation to the initial owners.

Question 34

Porite Company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash. Porite\'s practice is an example of:

Accepted Answer

accrual accounting

Question 35

Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting?

Accepted Answer

periodicity

Question 36

In a recent annual report, Apple Computer reported the following in one of its disclosure notes: \"Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized.\" This note exemplifies Apple\'s use of:

Accepted Answer

the matching principle

Question 37

GAAP is an abbreviation for

Accepted Answer

generally accepted accounting principles

Question 38

The FASB issues accounting standards in the form of:

Accepted Answer

Accounting Standards Updates

Question 39

Pronouncements issued by the Committee on Accounting Procedures:

Accepted Answer

Dealt with specific accounting and reporting problems

Question 40

The FASB\'s standard-setting process includes, in the correct order

Accepted Answer

Research, discussion paper, exposure draft, Accounting Standards Update.

Question 41

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley)? The Act:

Accepted Answer

Changed the entity responsible for setting accounting standards.

Question 42

CPAs are licensed by:

Accepted Answer

State governments.

Question 43

Which of the following has the statutory authority to set accounting standards in the United States?

Accepted Answer

SEC

Question 44

When a registrant company submits its annual filing to the SEC, it uses:

Accepted Answer

Form 10-K.

Question 45

The most likely important flaw leading to the demise of the APB was the perceived lack of:

Accepted Answer

Independence.

Question 46

Accounting standard-setting has been characterized as:

Accepted Answer

A political process.

Question 47

The International Accounting Standards Board:

Accepted Answer

Promotes the use of high-quality, understandable global accounting standards.

Question 48

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

Accepted Answer

All of these are provisions of the Act.

Question 49

The primary professional organization for those accountants working in the industry is the:

Accepted Answer

IMA

Question 50

In the Norwalk Agreement, the FASB and IASB pledged to:

Accepted Answer

Remove existing differences between their standards.

Question 51

Which of the following is not a concern expressed by the SEC regarding IFRS adoption by the U.S.?

Accepted Answer

The language barriers associated with cooperation among many countries in developing IFRS.

Question 52

The most political issue in the FASB\'s most recent deliberations and amendments to GAAP on business combinations was:

Accepted Answer

The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the purchase method of accounting for the combination.

Question 53

The primary historical reason for the FASB reversing its positions when political pressures occur is:

Accepted Answer

The SEC did not support the FASB position.

Question 54

The most recent example of the political process at work in standard-setting is the heated debate that occurred on the issue of:

Accepted Answer

Accounting for business combinations.

Question 55

Independent auditors express an opinion on the:

Accepted Answer

Fairness of financial statements.

Question 56

The possibility that the capital markets\' focus on periodic profits may tempt a company\'s management to bend or even break accounting rules to inflate reported net income is an example of:

Accepted Answer

An ethical dilemma.

Question 57

One of the elements that many believe distinguishes a profession from other occupations is the acceptance of responsibility by its members for the interests of those it serves, which is often articulated in:

Accepted Answer

Its code of ethics.

Question 58

SFAC 8 of the conceptual framework focuses on:

Accepted Answer

Objective and qualitative characteristics.

Question 59

The FASB\'s conceptual framework\'s qualitative characteristics of accounting information include:

Accepted Answer

Faithful representation.

Question 60

The FASB\'s conceptual framework\'s qualitative characteristics of accounting information include:

Accepted Answer

Relevance

Question 61

The conceptual framework\'s qualitative characteristic of relevance includes:

Accepted Answer

Predictive value.

Question 62

The conceptual framework\'s qualitative characteristic of faithful representation includes:

Accepted Answer

Neutrality

Question 63

SFAC No.5 focuses on:

Accepted Answer

Recognition and measurement concepts in accounting.

Question 64

The main issue in the debate over accounting for employee stock options was:

Accepted Answer

The amount of compensation expense that a company should recognize.

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