Test bank financial accounting 4th 4e david spiceland

Chapter 01 A Framework for Financial Accounting True / False Questions Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers True False Accounting information is used by investors to decide whether to invest in a company's stock True False Accounting information is used by creditors to decide whether to invest in a company's stock True False The primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to internal parties for decisionmaking purposes True False Financing activities are transactions involving externals sources of funding True False Investing activities include the purchase and sale of long-term resources True False Operating activities include transactions that relate to the primary operations of the company True False A corporation is an entity that is legally separate from its owners True False Cash, inventory, supplies, and buildings are examples of liabilities True False 1-1 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 10 Amounts owed to suppliers, employees, the government in the form of taxes, and utility companies are examples of liabilities True False 11 If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000 True False 12 If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000, then total assets equal $7,000 True False 13 The accounting equation shows that a company's resources equal creditors' and owners' claims to those resources True False 14 The costs related to rent, utilities, and salaries in the current reporting period are examples of liabilities True False 15 The difference between revenues and expenses is referred to as net income or net loss True False 16 If a company reports revenues of $17,000 and expenses of $12,000, then net income equals $5,000 True False 17 Expenses are regular cash payments by a corporation to its stockholders True False 18 Dividends represent a return of the company's profits to its owners, the stockholders True False 19 One of the differences between a partnership and a corporation is that owners of a partnership have limited liability True False 20 Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation True False 1-2 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 21 One advantage of the corporate form of business is double taxation True False 22 Double taxation refers to a corporation's income being taxed twice—first when the company pays corporate income taxes on income it earns, and then again when stockholders pay personal income taxes when the company distributes that income as dividends to them True False 23 Financial statements are periodic reports published by the company for the purpose of providing information to managers True False 24 The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time True False 25 The statement of stockholders' equity is a financial statement that summarizes the changes in stockholders' equity over an interval of time True False 26 The two primary components of stockholders' equity include common stock and revenue True False 27 Common stock represents an external source of stockholders' equity, whereas retained earnings represents an internal source True False 28 Retained earnings represents the cumulative amount of net income, over the life of the company, that has not been distributed to stockholders as dividends True False 29 Dividends are considered an expense in running the business and reported in the income statement True False 30 All cash transactions reported in the statement of cash flows are classified as (1) operating activities, (2) investing activities, or (3) financing activities True False 31 Investing cash flows generally include cash receipts and cash payments for transactions involving revenue and expense activities during the period True False 1-3 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 32 Operating cash flows generally include cash transactions for the purchase and sale of investments and long-term assets True False 33 Financing cash flows include cash transactions with lenders, such as borrowing money and repaying debt, and with stockholders, such as issuing stock and paying dividends True False 34 Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings True False 35 Financial accounting has an impact on everyday business decisions as well as wideranging economic consequences True False 36 Investors and creditors rely heavily on financial accounting information in making investment and lending decisions True False 37 In general, if a company's net income is increasing, so will its stock price True False 38 The rules of financial accounting are called Generally Accepted Accounting Principles (GAAP) True False 39 Financial accounting and reporting standards in the United States are established primarily by the Financial Accounting Standards Board (FASB) True False 40 The 1933 Securities Act and the 1934 Securities Exchange Act were designed to restore investor confidence in financial accounting following the stock market crash in 1929 True False 41 The 1934 Securities Exchange Act gives the Securities and Exchange Commission (SEC) the power to require companies that publicly trade their stock to prepare periodic financial statements for distribution to investors and creditors True False 1-4 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 42 The role of independent auditors is to help ensure that management has in fact appropriately applied Generally Accepted Accounting Principles (GAAP) in preparing the company's financial statements True False 43 Auditors are trained individuals hired by a company as an independent party to express a professional opinion of the fairness of that company's financial statements True False 44 The primary objective of financial accounting is to provide useful information to managers in making decisions True False 45 Public accounting firms are professional service firms that traditionally have focused on three areas: auditing, tax preparation/planning, and business consulting True False 46 The Financial Accounting Standards Board's conceptual framework does not prescribe Generally Accepted Accounting Principles It provides an underlying foundation for the development of accounting standards and interpretation of accounting information True False Multiple Choice Questions 47 What is the primary purpose of financial accounting? A B C D Determine the amount of tax liability owed to the government Communicate business activities to internal management Measure business activities and communicate those measures to external users t Measure the profitability of the company in order to assist employees with makin 48 The primary purpose(s) of financial accounting is(are) to: A B C D Measure and record business transactions Prepare federal and state tax returns Communicate financial results to investors and creditors Both measure and communicate financial information to external parties 1-5 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 49 Which definition below best describes financial accounting? A B C D Process of measuring income taxes owed to the government System of maintaining communication with a company's customers and supplie Procedures designed to enhance the company's image to potential investors Measuring business activities and communicating them to external parties 50 Financial accounting does not deal with which of the following? A B C D Measuring a company's economic activity Providing information to internal users Preparing financial reports Communicating financial results to investors 51 Financial accounting: A B C D Provides information primarily for external decision makers Provides information primarily for a company's employees Provides information primarily for the use of managers of the company Is primarily used to compute a company's tax obligation 52 The primary focus for financial accounting information is to provide information useful for: Investing decisions Credit decisions a Yes Yes b Yes No c No Yes d No No A B C D Investment decisions and credit decisions Investment decisions but not credit decisions Credit decisions but not investment decisions Neither investment decisions nor credit decisions 53 Which of the following groups is not among the external users for whom financial statements are prepared? A B C D 1-6 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 54 The form of business organization that is legally separate from its owners is a: A B C D Sole proprietorship 55 Which business form has the advantage of limited liability? A B C D Sole proprietorship All business forms share equal limited liability 56 Limited liability means: A B C D Stockholders of a corporation are not obligated to pay the corporation's debts out Liabilities of a company cannot exceed its assets Companies are not allowed to borrow unless they are profitable Companies are less likely to be sued if they are formed as a corporation 57 One disadvantage of the corporate form of business is: A B C D Access to more capital 58 Which of the following is an operating activity? A B C D Issuing common stock Borrowing cash from a bank to acquire a factory Paying electricity bills for the month 1-7 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 59 How many of the following transactions are operating activities? Borrowed $50,000 from the bank Purchased $12,000 in supplies Provide services to customers for $27,000 Paid the utility bill of $750 Purchased a delivery truck for $12,000 Received $25,000 from issuing common stock A B C D 60 Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as: A B C D Investing activitie Operating activities Management activities Financing activitie 61 Stimpleton Company engages in the following cash payments: Purchase equipment Pay rent $2,000 500 Repay loan to the bank 5,000 Pay worker's salaries 1,000 What is the total amount of cash paid for operating activities? A B C D 62 Accountants are responsible for measuring various operating, investing and financing activities Which of the following correctly matches the activity with its type? A B C D Investing - paying utilities for the month Investing - purchasing land Operating - paying dividends to stockholders Financing - selling equipment for cash 1-8 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 63 Transactions of a company that include the purchase and sale of long-term assets are referred to as: A B C D Investing activitie Financing activities Expenditure activities Operating activitie 64 McGill purchases additional office equipment to better serves its customers This purchase is classified as what type of activity? A B C D 65 Transactions of a company involving external sources of funding are referred to as: A B C D Investing activitie Financing activities Operating activitie 66 Financing activities include: A B C D Primary operations such as selling goods to customers Transactions with company employees Transactions involving external sources of funding The purchase and sale of long-term assets 67 Financing activities include: A B C D The purchase of a building Issuing common stock to stockholders Transactions with company employees Selling goods or services to customers 68 The accounting equation is defined as: A B C D Assets = Liabilities + Stockholders' Equity Assets = Liabilities - Stockholders' Equity Net Income = Revenues - Expenses Liabilities + Revenues = Assets 1-9 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 69 Which statement below best describes the accounting equation? A B C D The change in retained earnings equals net income less dividends Equality of revenue and expense transactions over time Resources of the company equal creditors' and owners' claims to those resourc Financing activities equal investing and operating activities 70 If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true? A B C D The company's assets exceed liabilities by $60,000 The company has issued $60,000 of common stock Net income for the year equals $60,000 Total revenues during the year equal $60,000 71 Emmitt had the following final balances after the first year of operations: assets, $55,000; stockholders' equity, $25,000; dividends, $3,000; and net income, $10,000 What is the amount of Emmitt's liabilities? A B C D 72 An alternative form of the accounting equation is: A B C D Net Income = Revenues - Expenses Stockholders' Equity = Assets + Liabilities Assets = Liabilities - Stockholders' Equity Assets - Liabilities = Stockholders' Equity 73 The accounts that represent the resources of the company are called: A B C D 74 The assets of a company represent: A B C D Amounts owed to creditors Sales of goods or services to customers Resources that will be used to benefit the company Investments by stockholders 1-10 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 197 Account classifications include assets, liabilities, stockholders' equity, dividends, revenues, and expenses Account Classificati ons Accounts Related Transactions Accounts Receivable Provide services on account Land Purchase land for operations Prepaid Rent Purchase rent in advance Salaries Expense Pay for cost of salaries Utilities Expense Pay for cost of utilities Service Revenue Provide services to customers Accounts Payable Purchase materials on account Notes Payable Borrow from the bank Dividends Distribute cash to stockholders 10 Common Stock Issue stock to stockholders Required: Indicate the account classification for each account name Account Classifications Account Names Asset Accounts Receivable Asset Land Asset Prepaid Rent Expense Salaries Expense Expense Utilities Expense Revenue Service Revenue Liability Accounts Payable Liability Notes Payable Dividends Dividends 10 Stockholders’ Equity Common Stock AACSB: Reflective Thinking AICPA: FN Measurement Blooms: Understand Difficulty: Medium Learning Objective: 01-02 Understand the business activities that financial accounting measures Topic: Measuring Business Activities 1-366 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 1-367 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 198 Tiffany's provides financial services related to investment selections, retirement planning, and general insurance needs For the current year, the company reports the following amounts: Advertising Expense $31,200 Service Revenue $129,300 Buildings 108,000 Interest Expense 3,500 67,800 Utilities Expense 14,500 Salaries Expense Accounts Payable 6,300 Equipment 25,700 Cash 6,400 Notes Payable 30,000 In addition, the company had common stock of $60,000 at the beginning of the year and issued an additional $15,000 during the year The company also had retained earnings of $20,000 at the beginning of the year and paid dividends of $3,500 Required: Prepare the income statement, statement of stockholders' equity, and balance sheet for Tiffany's for the year ended December 31 Tiffany’s Income Statement For the year ended December 31 Service revenue $129,300 Expenses: Advertising 31,200 Salaries 67,800 Utilities 14,500 Interest 3,500 Total expenses 117,000 Net income $12,300 1-368 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education Tiffany’s Statement of Stockholders’ Equity For the year ended December 31 Balance at beginning of the year Issuance of common stock Common Stock Retained Earnings Total Stockholders’ Equity $60,000 $20,000 $80,000 15,000 15,000 Add: Net income for the year 12,300 Less: Dividends Balance at end of the year $75,000 12,300 (3,500) (3,500) $28,800 $103,800 Tiffany’s Balance Sheet December 31 Assets Cash Equipment Buildings Liabilities $6,400 Accounts payable $6,300 25,700 Notes payable 30,000 108,000 Total liabilities 36,300 Stockholders’ Equity Common stock 75,000 Retained earnings 28,800 Total stockholders’ equity Total assets $140,100 Total liabilities and stockholders’ equity 103,800 $140,100 AACSB: Reflective Thinking AICPA: FN Reporting Blooms: Apply Difficulty: Hard Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements Topic: Communicating through Financial Statements 1-369 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 1-370 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 199Below are incomplete financial statements Income Statement Statement of Stockholders’ Equity Common Stock Revenues (a) Expenses: Salaries Retained Earnings Beginning $15,000 $11,000 Issuances (c) Rent 5,000 Net income Advertising 7,000 Dividends Net income (b) Ending $8,000 3,000 (d) $18,000 $9,000 Balance Sheet Assets: Cash Liabilities: $6,000 Accounts payable Supplies Land Buildings (e) $5,000 Stockholders’ Equity: 7,000 Common Stock 14,000 Retained Earnings Total assets Total liabilities and stockholders’ (f) equity Required: Calculate the missing amounts (Suggested order of calculation) On the statement of stockholders' equity, $15,000 + (c) = $18,000 (c) = $3,000 $8,000 + $3,000 - (d) = $9,000 (d) = $2,000 (b) = $3,000 From (b), (a) - $11,000 - $5,000 - $7,000 = $3,000 (b) (a) = $26,000 From the statement of stockholders' equity, (g) = $18,000 (h) = $9,000 From (g) and (h), $5,000 + $18,000 (g) + $9,000 (h) = (i) (i) = $32,000 From total liabilities and stockholders' equity, 1-371 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education (g) (h) (i) (f) = $32,000 From (f), $6,000 + (e) + $7,000 + $14,000 = $32,000 (f) (e) = $5,000 AACSB: Reflective Thinking AICPA: FN Reporting Blooms: Analyze Difficulty: Hard Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements Topic: Communicating through Financial Statements 1-372 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 1-373 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 200 Simplex Corporation provides the following information at the end of the year Salaries payable to workers at the end of the year Advertising expense for the year $3,500 8,700 Building that has been purchased 70,000 Supplies at the end of the year 7,500 Retained earnings 38,000 Utilities expense for the year 4,200 Note payable to the bank 21,500 Service revenue earned during the year 67,800 Salary expense for the year 24,200 Accounts payable to suppliers 6,700 Dividends paid to shareholder during the year Common stock that has been issued, including $8,000 that was issued this year Cash remaining ? 30,000 5,500 Interest expense for the year 1,800 Accounts receivable from customers 16,700 Required: Prepare the income statement, statement of stockholders' equity, and balance sheet for Simplex Corporation on December 31 The balance of retained earnings at the beginning of the year equals $24,500 Simplex Corporation Income Statement For the year ended December 31 Service revenue $67,800 Expenses: Advertising 8,700 Utilities 4,200 Salaries 24,200 Interest 1,800 Total expenses Net income 38,900 $28,900 1-374 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education Simplex Corporation Statement of Stockholders’ Equity For the year ended December 31 Common Stock Balance at January $22,000 Issuance of common stock 8,000 Net income for the year Less: Dividends Balance at December 31 * Beginning retained earnings + Net income $30,000 Retained Earnings Total Stockholders Equity’ $24,500 $46,500 8,000 28,900 28,900 (15,400)* (15,400) $38,000 $68,000 $24,500 28,900 - Dividends ? = Ending retained earnings $38,000 Simplex Corporation Balance Sheet December 31, 2018 Assets Liabilities Cash $5,500 Accounts payable Accounts receivable 16,700 Salaries payable Supplies Buildings $6,700 3,500 7,500 Notes payable 21,500 70,000 Total liabilities 31,700 Stockholders’ Equity Total assets Common stock 30,000 Retained earnings 38,000 Total stockholders’ equity 68,000 $99,700 Total liabilities and stockholders’ equity $99,700 AACSB: Reflective Thinking AICPA: FN Reporting Blooms: Apply Difficulty: Hard Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements Topic: Communicating through Financial Statements 1-375 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 201 The four underlying assumptions of generally accepted accounting principles are economic entity, monetary unit, periodicity, and going concern Consider the following four independent situations Masterson provides music cassettes for the past 30 years Because of the advance in electronic musical devices, customer demand has dwindled over the years to almost nothing in the current year and the company can no longer pay its debts For the most recent year, the company reports its assets in the balance sheet at historical (original) cost Phillips Flooring specializes in the installation of wood flooring The company has the usual business expenses: salaries, supplies, utilities, advertising, and taxes Mr Phillips took his wife and two sons to Six Flags Mr Phillips reported the airfare and hotel expenses in the income statement of Phillips Flooring Mama's Restaurant has over 200 stores throughout the Southeast Approximately 100,000 customers visit its stores each day Because of the continual nature of dining, the company does not publish an income statement The company feels that it has an indefinite life and a periodic report would mislead investors Indian Packaging delivers packages between the United States and India During the current year, the company delivered 2,000 packages for its American customers totaling $75,000 in revenue For its Indian customers, the company delivered 1,000 packages totaling 1,500,000 Indian Rupee The company's income statement indicates that total revenue equals 3,000 packages delivered with no corresponding amount in the income statement Required: For each situation, indicate which of the underlying assumptions of GAAP is violated Assumption violated Going concern Economic entity Periodicity Monetary unit AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Understand Difficulty: Medium Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted accounting principles Topic: Conceptual Framework 1-376 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 202 Listed below are several terms and definitions associated with the FASB's conceptual framework Terms Definitions Verifiability a Requires the consideration of the costs and value of information Relevance b Recording transaction only for the company Timeliness c The indefinite life of a company can be broken into definite periods Cost effectiveness d Accounting should be useful in making decisions Decision usefulness e Agreement between a measure and the phenomenon it represents Faithful representation f Information arrives prior to the decision Materiality g Information is related to the decision at hand Economic entity assumption h Implies consensus among different measures Periodicity assumption i Concerns the relative size of an item and its effect on decisions Required: Pair each term with its related definition h g f a d e i b c AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Understand Difficulty: Medium Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted accounting principles Topic: Conceptual Framework 1-377 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 203 Define accounting Describe the two primary functions of financial accounting and its role in our society Accounting is "the language of business." The functions of financial accounting are to measure the business activities of a company and to communicate those measurements to external parties for decision-making purposes A large number of people, including investors and creditors, rely on financial accounting information to make informed, and presumably, better decisions about companies AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Remember Difficulty: Easy Learning Objective: 01-01 Describe the two primary functions of financial accounting Topic: Defining Accounting 204 Describe the three fundamental business activities that accountants measure What account classifications are typically associated with each type of business activity? Financing activities are transactions involving external sources of funding There are two basic sources of this external funding—the owners of the company who invest their own funds in the business, and creditors who lend money to the company Investing activities include the purchase and sale of (1) long-term resources such as land, buildings, equipment, and machinery; and (2) any resources not directly related to a company's normal operations Operating activities include transactions that relate to the primary operations of the company, such as providing products and services to customers and the associated costs of doing so, like utilities, taxes, advertising, wages, rent, and maintenance In general, financing activities are associated with long-term liabilities and stockholders' equity (including dividends), investing activities are associated with long-term assets, and operating activities are associated with revenues and expenses AACSB: Reflective Thinking AICPA: FN Measurement Blooms: Understand Difficulty: Medium Learning Objective: 01-02 Understand the business activities that financial accounting measures Topic: Measuring Business Activities 1-378 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education 205 List and describe the four financial statements most frequently provided to external users The income statement presents revenues and expenses over an interval of time The statement of shareholders' equity summarizes the changes in stockholders' equity (common stock and retained earnings) over an interval of time The balance sheet presents the assets, liabilities, and stockholders' equity at a point in time The statement of cash flows presents the cash receipts and cash payments over an interval of time for operating, investing, & financing activities AACSB: Reflective Thinking AICPA: FN Reporting Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements Topic: Communicating through Financial Statements 206 How does the value of an audit affect financial statements? Outside auditors add credibility to financial statements, increasing the confidence of capital market participants who rely on financial statements in making investment and credit decisions and recommendations AACSB: Reflective Thinking AICPA: FN Reporting Blooms: Understand Difficulty: Medium Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of GAAP in financial accounting Topic: Financial Accounting Standards 207 Define the four basic assumptions underlying Generally Accepted Accounting Principles: (a) economic entity, (b) going concern, (c) periodicity, (d) monetary unit Economic entity - All economic events can be identified with a particular economic entity Going concern - In the absence of information to the contrary, it is anticipated that a business entity will continue to operate indefinitely Periodicity The life of a company can be divided into artificial time periods to provide timely information to external users Monetary unit - In the U.S., financial statement elements should be measured in terms of the U.S dollar It assumes that the value of a dollar is stable over time AACSB: Reflective Thinking AICPA: BB Critical Thinking Blooms: Remember Difficulty: Easy Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted 1-379 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education accounting principles Topic: Conceptual Framework 1-380 Copyright © 2016 McGraw-Hill Education All rights reserved No reproduction or distribution without the prior written consent of McGraw-Hill Education ... its stock price True False 38 The rules of financial accounting are called Generally Accepted Accounting Principles (GAAP) True False 39 Financial accounting and reporting standards in the United... False 35 Financial accounting has an impact on everyday business decisions as well as wideranging economic consequences True False 36 Investors and creditors rely heavily on financial accounting. .. by the Financial Accounting Standards Board (FASB) True False 40 The 1933 Securities Act and the 1934 Securities Exchange Act were designed to restore investor confidence in financial accounting