Click On The
Link Below to Purchase A+ Graded Material
Instant Download
Midterm Exam: Chapters 1 Through 4
Chapter 1
FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS
IFRS questions are available at the end of this chapter.
TRUE-FALSE—Conceptual
1. Financial
accounting is the process of identifying, measuring, analyzing, and
communicating financial information needed by management to plan, evaluate, and
control a company’s operations.
2. Financial
statements are the principal means through which a company communicates its
financial information to those outside it.
3. Users
of financial reports provided by a company use that information to make their
capital allocation decisions.
4. An
effective process of capital allocation promotes productivity and provides an
efficient market for buying and selling securities and obtaining and granting
credit.
5. The
objective of financial reporting is to provide financial information about the
reporting entity that is useful to present and potential equity investors, but
not to users who are not investors.
6. Investors
are interested in financial reporting because it provides information that is
useful for making decisions (decision-usefulness approach).
7. Users
of financial accounting statements have both coinciding and conflicting needs
for information of various types.
8. The
Securities and Exchange Commission appointed the Committee on Accounting
Procedure.
9. The
passage of a new FASB Standards Statement requires the support of five of the
seven board members.
10. Financial
Accounting Concepts set forth fundamental objectives and concepts that are used
in developing future standards of financial accounting and reporting.
11. The
AICPA created the Accounting Principles Board in 1959.
12. The
FASB’s Codification integrates existing GAAP, and creates new GAAP.
13. The
AICPA’s Code of Professional Conduct requires that members prepare financial
statements in accordance with generally accepted accounting principles.
14. GAAP
is a product of careful logic or empirical findings and are not influenced by
political action.
15. The
Public Company Accounting Oversight Board has oversight and enforcement
authority and establishes auditing and independence standards and rules.
16. The
expectations gap is caused by what the public thinks accountants should do and
what accountants think they can do.
17. Financial
reports in the early 21st century did not provide any information about a
company’s soft assets (intangibles).
18. Accounting
standards are now less likely to require the recording or disclosure of fair
value information.
19. U.S.
companies that list overseas are required to use International Financial Reporting
Standards, issued by the International Accounting Standards Board.
20. Ethical
issues in financial accounting are governed by the AICPA.
True-False Answers—Conceptual
MULTIPLE CHOICE—Conceptual
21. General-purpose
financial statements are the product of
a. financial accounting.
b. managerial accounting.
c. both financial and managerial accounting.
d. neither financial nor managerial accounting.
22. Users of financial reports include all of the following except
a. creditors.
b. government agencies.
c. unions.
d. All of these are users.
23. The financial statements most frequently provided include all of
the following except the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
24. The information provided by financial reporting pertains to
a. individual business enterprises, rather than
to industries or an economy as a whole or to members of society as consumers.
b. business industries, rather than to
individual enterprises or an economy as a whole or to members of society as
consumers.
c. individual business enterprises, industries,
and an economy as a whole, rather than to members of society as consumers.
d. an economy as a whole and to members of
society as consumers, rather than to individual enterprises or industries.
25. All
the following are differences between financial and managerial accounting in
how accounting information is used except to
a. plan and control company's operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the
extent of a loan to grant.
d. All the above.
26. Which
of the following represents a form of communication through financial reporting
but not through financial statements?
a. Balance sheet.
b. President's letter.
c. Income statement.
d. Notes to financial statements.
P27. The
process of identifying, measuring, analyzing, and communicating financial
information needed by management to plan, evaluate, and control an
organization’s operations is called
a. financial accounting.
b. managerial accounting.
c. tax accounting.
d. auditing.
28. How does accounting help the capital allocation process attract
investment capital?
a. Provides timely, relevant information.
b. Encourages
innovation.
c. Promotes productivity.
d. a and b above.
29. Whether a business is successful and thrives is determined by
a. markets.
b. free enterprise.
c. competition.
d. all of these.
30. An effective capital allocation process
a. promotes productivity.
b. encourages innovation.
c. provides an efficient market for buying and
selling securities.
d. all of these.
31. Financial statements in the early 2000s provide information
related to
a. nonfinancial measurements.
b. forward-looking data.
c. hard assets (inventory and plant assets).
d. none of these.
32. Which
of the following is not a major challenge facing the accounting profession?
a. Nonfinancial measurements.
b. Timeliness.
c. Accounting for hard assets.
d. Forward-looking information.
33. What
is the objective of financial reporting?
a. Provide information that is useful to
management in making decisions.
b. Provide information that clearly portray
nonfinancial transactions.
c. Provide information about the reporting
entity that is useful to present and potential equity investors, lenders, and
other creditors.
d. Provide information that excludes claims to
the resources.
34. Primary
users for general-purpose financial statements include
a. creditors.
b. employees.
c. investors.
d. both creditors and investors.
35. When making decisions, investors are interested in assessing
a. the company’s ability to generate net cash
inflows.
b. management’s ability to protect and enhance
the capital providers’ investments.
c. Both a and b.
d. the company’s ability to generate net income.
36. Accrual
accounting is used because
a. cash flows are considered less important.
b. it provides a better indication of ability to
generate cash flows than the cash basis.
c. it recognizes revenues when cash is received
and expenses when cash is paid.
d.
none of the above.
37. Which
perspective is adopted as part of the objective of general-purpose financial
reporting?
a. Decision-usefulness perspective.
b. Proprietary perspective.
c. Entity perspective.
d. Financial reporting perspective.
38. Accounting
principles are "generally accepted" only when
a. an authoritative accounting rule-making body
has established it in an official pro-nouncement.
b. it has been accepted as appropriate because
of its universal application.
c. both a and b.
d. neither a nor b.
39. A common set of accounting standards and procedures are called
a. financial accounting standards.
b. generally accepted accounting principles.
c. objectives of financial reporting.
d. statements of financial accounting concepts.
40. Which of the following is a general limitation of "general
purpose financial statements"?
a. General purpose financial statements may not
be the most informative for a specific enterprise.
b. General purpose financial statements are comparable.
c. General purpose financial statements are
assumed to present fairly the company's financial operations.
d. None of the above.
41. What is the relationship between the Securities and Exchange
Commission and accounting standard setting in the United States?
a. The SEC requires all companies listed on an
exchange to submit their financial statements to the SEC.
b. The SEC coordinates with the AICPA in
establishing accounting standards.
c. The SEC has a mandate to establish accounting
standards for enterprises under its jurisdiction.
d. The SEC reviews financial statements for
compliance.
42. What is due process in the context of standard setting at the
FASB?
a. FASB operates in full view of the public.
b. Public hearings are held on proposed accounting
standards.
c. Interested parties can make their views
known.
d. All of the above.
43. Which of the following organizations has been responsible for
setting U.S. accounting standards?
a. Accounting Principles Board.
b. Committee on Accounting Procedure.
c. Financial Accounting Standards Board.
d. All of the above.
44. Why did the AICPA create the Accounting Principles Board?
a. The SEC disbanded the previous standard
setting organization.
b. The previous standard setting organization
did not provide a structured set of accounting principles.
c. No such organization existed in the past.
d. None of the above.
45. Which
organization was responsible for issuing Accounting Research Bulletins?
a. Accounting Principles Board.
b. Committee on Accounting Procedure.
c. The SEC.
d. AICPA.
46. A characteristic of generally accepted accounting principles
include the following:
a. common set of standards and principles.
b. standards and principles are based federal
statutes.
c. acceptance requires an affirmative vote of
Certified Public Accountants.
d. practices that become accepted for at least a
year by all industry members.
47. Characteristics of generally accepted accounting principles
include all of the following except
a. authoritative accounting the rule-making body
established a principle of reporting.
b. standards are considered useful by the
profession.
c. each principle is approved by the SEC.
d. practice has become universally accepted over
time.
48. Why was it believed that accounting standards that were issued
by the Financial Accounting Standards Board would carry more weight?
a. Smaller membership.
b. FASB board members are well-paid.
c. FASB board members must be CPAs.
d. Due process.
49. The passage of a new FASB Standards Statement requires the
support of
a. all Board members.
b. three Board members.
c. four Board members.
d. five Board members.
50. What is the purpose of Emerging Issues Task Force?
a. Provide interpretation of existing standards.
b. Provide a consensus on how to account for new
and unusual financial transactions.
c. Provide interpretive guidance.
d. Provide timely guidance on select issues.
