Test bank for intermediate accounting 17th edition by stice

Test Bank for Intermediate Accounting 17th Edition by SticeThe overall objective of financial reporting is to provide information 1.. To provide information about an entity's liquidatio

Test Bank for Intermediate Accounting 17th Edition by Stice

The overall objective of financial reporting is to provide information

1 that is useful for decision making

2 about an enterprise's assets, liabilities, and owners' equity

3 about an enterprise's financial performance during a period

4 that allows owners to assess management's performance

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

1 To provide information about an entity's assets and claims against those assets

2 To provide information that is useful in assessing an entity's sources and uses of cash

3 To provide information that is useful in lending and investing decisions

4 To provide information about an entity's liquidation value

Financial accounting is the area of accounting that emphasizes reporting to

1 management

2 regulatory bodies

3 internal auditors

4 creditors and investors

Management accounting is the area of accounting that emphasizes

1 reporting financial information to external users

2 reporting to the SEC

3 combining accounting knowledge with an expertise in data processing

4 developing accounting information for use within a company

The responsibility to review the work of the accountants and issue opinions as

to the fairness of the financial statements rests with

1 the external auditor

2 the board of directors

3 the internal auditors

4 management

As independent (or external) auditors, CPAs are primarily responsible for

1 preparing financial statements in conformity with GAAP

2 certifying the accuracy of financial statements

3 expressing an opinion as to the fairness of financial statements

4 filing financial statements with the SEC

Which of the following is an internal user of a company's financial

information?

1 Board of directors

2 Stockholders in the company

3 Holders of the company's bonds

4 Creditors with long-term contracts with the company

Prior to 1973, generally accepted accounting principles were established

1 by the Financial Accounting Foundation

2 by the Securities and Exchange Commission

3 under the direction of the American Institute of Certified Public Accountants

4 by the individual states

Members of the Financial Accounting Standards Board are appointed by the

1 American Accounting Association

2 Financial Accounting Foundation

3 Securities and Exchange Commission

4 American Institute of Certified Public Accountants

The Financial Accounting Foundation oversees the

1 operations of the AICPA

2 operations of the FASB

3 AAA

4 financial reporting arm of the SEC

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

1 all members of the FASB serve full time, are paid a salary, and are independent

of any public or private enterprises

2 over 50 percent of the members of the FASB are required to be Certified Public Accountants

3 the FASB issues exposure drafts of proposed standards

4 all members of the FASB possess experience in both public and corporate accounting

Which of the following is a characteristic of the Financial Accounting Standards Board?

1 The FASB is composed of five members

2 FASB members must come from CPA firms

3 FASB members are part-time

4 FASB members may retain their positions with previous employers

Documents issued by the FASB include all of the following except

1 Statements of Financial Accounting Standards

2 Interpretations of Statements of Financial Accounting Standards

3 Statements of Financial Accounting Concepts

4 Financial Reporting Releases

Primary responsibility for GAAP and public reporting currently rests with

the

1 SEC

2 FASB

3 Congress

4 AICPA

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

1 issue statements which reflect a consensus of the EITF on how to account for new financial reporting issues where guidance is needed quickly

2 do research on financial reporting issues that are being addressed by the AICPA

3 respond to groups lobbying the FASB on issues that affect a particular industry

4 develop concept statements the AICPA can use as a frame of reference to solve future problems

The normal order followed by the FASB in publishing its standards is

1 statement, discussion memorandum, opinion

2 discussion memorandum, interpretation, exposure draft, statement

3 exposure draft, discussion memorandum, statement

4 discussion memorandum, exposure draft, statement

Proper application of accounting principles is most dependent upon the

1 existence of specific guidelines

2 oversight of regulatory bodies

3 external audit function

4 professional judgment of the accountant

The Governmental Accounting Standards Board

1 was incorporated into the Financial Accounting Standards Board when the FASB was created

2 addresses financial reporting issues of U.S government treaties and treasury rulings

3 addresses the financial reporting issues related to state and local governments

4 addresses the governmental reporting activities of the SEC

The primary current source of generally accepted accounting principles for

governmental operations is the

1 Financial Accounting Standards Board

2 Securities and Exchange Commission

3 Governmental Accounting Standards Board

4 Government Accounting Office

The process of establishing financial accounting standards is

1 a democratic process in that a majority of practicing accountants must agree with a standard before it becomes implemented

2 a legislative process based on rules promulgated by government agencies

3 based solely on economic analysis of the effects each standard will have if it is implemented

4 a social process which incorporates political actions of various interested user groups as well as professional research and logic

Congress

1 has legally barred the SEC from interfering with the work of the FASB

2 is restricted from holding hearings concerning the accounting profession

3 gave the SEC the power to establish accounting principles for corporations whose stock is sold and traded to the general public

4 appoints two of the five members of the FASB

Once the FASB has established an accounting standard, the

1 standard is continually reviewed to see if modification is necessary

2 standard is not reviewed unless the SEC makes a complaint

3 task of reviewing the standard to see if modification is necessary is given to the AICPA

4 principle of consistency requires that no revisions ever be made to the standard

Primary responsibility for the preparation of financial statements in accordance with generally accepted accounting principles rests with

1 the internal auditors

2 management

3 the external auditors

4 the board of directors

Which is the correct historical sequence of accounting rule-making bodies?

1 CAP, FASB, APB

2 CAP, APB, FASB

3 FASB, APB, CAP

4 APB, CAP, FASB

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

1 American Institute of Certified Public Accountants

2 Securities and Exchange Commission

3 Financial Accounting Standards Board

4 Governmental Accounting Standards Board

How many board members serve on the FASB?

1 5

2 7

3 14

4 20

When the FASB deliberates about an accounting standard, firms whose financial statements would be affected by that standard

1 are legally barred from lobbying the FASB

2 are not allowed to lobby the FASB if the standard would have a negative impact

on their financial statements

3 are not allowed to lobby the FASB if the standard would have a positive impact

on their financial statements

4 are free to lobby for or against the standard

Pronouncements issued by the SEC include

1 Accounting Research Bulletins

2 Statements on Accounting Principles

3 Financial Accounting Standards

4 Financial Reporting Releases

The primary purpose of the Securities and Exchange Commission is to

1 regulate the issuance and trading of securities

2 issue accounting and auditing regulations for publicly held companies

3 prevent the trading of speculative securities

4 enforce generally accepted accounting principles

Form 10-K is submitted to the

1 FASB

2 GASB

3 IRS

4 SEC

The Journal of Accountancy is published by the

1 American Accounting Association

2 American Institute of Certified Public Accountants

3 Financial Executives Institute

4 Financial Accounting Standards Board

The International Accounting Standards Board was formed to

1 enforce FASB standards in foreign countries

2 develop worldwide accounting standards

3 establish accounting standards for U.S multinational companies

4 develop accounting standards for countries that do not have their own standard-setting bodies

Which of the following items is not a modifying convention?

1 Matching

2 Materiality

3 Industry practices

4 Conservatism

Generally accepted accounting principles

1 are accounting adaptations based on the laws of economic science

2 derive their credibility and authority from legal rulings and court precedents

3 derive their credibility and authority from the federal government through the financial reporting section of the SEC

4 derive their credibility and authority from general recognition and acceptance by the accounting profession

A conceptual framework of accounting should

1 lead to uniformity of financial statements among companies within the same industry

2 eliminate alternative accounting principles and methods

3 guide the AICPA in developing generally accepted auditing standards

4 define the basic objectives, terms, and concepts of accounting

Accountants prepare financial statements at arbitrary points in time during a company's lifetime in accordance with the accounting concept of

1 matching

2 comparability

3 accounting periods

4 materiality

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

1 accrual

2 consistency.

3 comparability

4 going concern

Important constraints underlying the qualitative characteristics of accounting information are

1 historical cost and going concern

2 materiality, conservatism, and cost-effectiveness

3 consistency, comparability, and conservatism

4 verifiability, neutrality, and representational faithfulness

When a large number of individuals, using the same measurement method, demonstrate that a high degree of consensus can be secured among

independent measurers, then the result exhibits the characteristic of

1 verifiability

2 neutrality

3 relevance

4 reliability

Which of the following measurement attributes is not currently used in

practice?

1 Present value

2 Net realizable value

3 Current replacement cost

4 Inflation-adjusted cost

Financial information exhibits the characteristic of consistency when

1 accounting procedures are adopted which smooth net income and make results consistent between years

2 extraordinary gains and losses are shown separately on the income statement

3 accounting entities give similar events the same accounting treatment each period

4 expenditures are reported as expenses and netted against revenue in the period

in which they are paid

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

1 timelessness

2 conservatism

3 reliability

4 accuracy

When financial reports from two different companies have been prepared and presented in a similar manner, the information exhibits the characteristic of

1 relevance

2 reliability

3 comparability

4 consistency

Accounting for inventories by applying the lower-of-cost-or-market is an

example of the application of

1 conservatism

2 comparability

3 consistency

4 materiality

The secondary qualitative characteristics of accounting information are

1 relevance and reliability

2 comparability and consistency

3 understandability and decision usefulness

4 materiality and conservatism

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

1 Revenues

2 Expenses

3 Losses

4 Distributions to owners

An item would be considered material and therefore would be disclosed in the financial statements if the

1 expected benefits of disclosure exceed the additional costs

2 impact on earnings is greater than 3 percent

3 FASB definition of materiality is met

4 omission of misstatement of the amount would make a difference to the users

What accounting concept justifies the use of accruals and deferrals?

1 Going-concern assumption

2 Corporate form of organization

3 Consistency characteristic

4 Arm's-length transactions

Which of the following is not a purpose of the conceptual framework of

accounting?

1 To provide definitions of key terms and fundamental concepts

2 To provide specific guidelines for resolving situations not covered by existing accounting standards

3 To assist accountants and others in selecting among alternative accounting and reporting methods

4 To assist the FASB in the standard-setting process

Which of the following is not an implication of the going-concern

assumption?

1 The historical cost principle is credible

2 Depreciation and amortization policies are justifiable and appropriate

3 The current/noncurrent classification of assets and liabilities is justifiable and significant

4 Amortizing research and development costs over multiple periods is justifiable and appropriate

The overriding qualitative characteristic of accounting information is

1 relevance

2 understandability

3 reliability.

4 decision usefulness

Which of the following statements concerning the objectives of financial

reporting is correct?

1 The objectives are intended to be specific in nature

2 The objectives are directed primarily toward the needs of internal users of accounting information

3 The objectives were the end result of the FASB's conceptual framework project

4 The objectives encompass not only financial statement disclosures, but other information as well

Recording the purchase price of a pencil sharpener (with an estimated useful life

of 10 years) as an expense of the current period is justified by the

1 going-concern assumption

2 materiality constraint

3 matching principle

4 comparability principle

Which of the following is not one of the fundamental criteria for

recognition?

1 Timeliness

2 Measurability

3 Relevance

4 Reliability

According to the FASB's conceptual framework, the process of reporting an item

in the financial statements of an entity is

1 realization

2 recognition

3 matching

4 allocation

Conservatism is best described as selecting an accounting alternative that

1 understates assets and/or net income

2 has the least favorable impact on owners' equity

3 overstates, as opposed to understates, liabilities

4 is least likely to mislead users of financial information

The financial statements that are prepared for the business are separate and distinct from the owners according to the

1 going-concern assumption

2 matching principle

3 economic entity assumption

4 full disclosure principle

According to Statement of Financial Accounting Concepts No 2, neutrality is an ingredient of Relevance Reliability

1 Yes Yes

2 Yes No

3 No No

4 No Yes

Under Statement of Financial Accounting Concepts No 2, representational faithfulness is an ingredient of Relevance Reliability

1 Yes Yes

2 Yes No

3 No No

4 No Yes

According to the FASB's conceptual framework, predictive and feedback values are ingredients of Relevance Reliability

1 Yes No

2 Yes Yes

3 No Yes

4 No No