ACC 303 Week 3 Quiz – Strayer NEW
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Chapter 2
CONCEPTUAL FRAMEWORK UNDERLYING FINANCIAL ACCOUNTING
IFRS questions are available at the end of this chapter.
TRUE-FALSE—Conceptual
1. A
soundly developed conceptual framework enables the FASB to issue more useful
and consistent pronouncements over time.
2. A
conceptual framework is a coherent system of concepts that flow from an
objective.
3. The
first level of the conceptual framework identifies the recognition,
measurement, and disclosure concepts used in establishing accounting standards.
4. The
IASB has also issued a conceptual framework and the FASB and the IASB have
agreed to develop a common conceptual framework.
5. Although
the FASB has developed a conceptual framework, no Statements of Financial
Accounting Concepts have been issued to date.
6. The
objective of financial reporting is the foundation of the conceptual framework.
7. Users
of financial statements are assumed to need no knowledge of business and
financial accounting matters to understand information contained in financial
statements.
8. Relevance
and faithful representation are the two primary qualities that make accounting
information useful for decision making.
9. The
idea of consistency does not mean that companies cannot switch from one accounting
method to another.
10. Timeliness
and neutrality are two ingredients of relevance.
11. Verifiability
and predictive value are two ingredients of faithful representation.
12. Revenues,
gains, and distributions to owners all increase equity.
13. Comprehensive
income includes all changes in equity during a period except those resulting
from investments by owners and distributions to owners.
14. The
historical cost principle would be of limited usefulness if not for the going
concern assumption.
15. The
economic entity assumption means that economic activity can be identified with
a particular legal entity.
16. The
expense recognition principle states that debits must equal credits in each
transaction.
17. Revenues
are realizable when assets received or held are readily convertible into cash
or claims to cash.
18. Supplementary
information may include details or amounts that present a different perspective
from that adopted in the financial statements.
19. In
order to justify reguiring a particular measurement or disclosure, the benefits
to be derived from it must equal the costs associated with it.
20. Prudence
or conservatism means when in doubt, choose the solution that will be least
likely to overstate liabilities or expenses.
True False Answers—Conceptual
MULTIPLE CHOICE—Conceptual
21. Generally accepted accounting principles
a. are fundamental truths or axioms that can be
derived from laws of nature.
b. derive their authority from legal court
proceedings.
c. derive their credibility and authority from
general recognition and acceptance by the accounting profession.
d. have been specified in detail in the FASB
conceptual framework.
22. A
soundly developed conceptual framework of concepts and objectives should
a. increase financial statement users'
understanding of and confidence in financial reporting.
b. enhance comparability among companies'
financial statements.
c. allow new and emerging practical problems to
be more quickly solved.
d. all of these.
23. Which
of the following are not true
concerning a conceptual framework in account-ing?
a. It should be a basis for standard-setting.
b. It should allow practical problems to be
solved more quickly by reference to it.
c. It should be based on fundamental truths that
are derived from the laws of nature.
d. All of the above (a-c) are true.
24. What
is a purpose of having a conceptual framework?
a. To enable the profession to more quickly
solve emerging practical problems.
b. To provide a foundation from which to build
more useful standards.
c. Neither a nor b.
d. Both a and b.
S25. Which
of the following is not a benefit associated with the FASB Conceptual Framework
Project?
a. A conceptual framework should increase
financial statement users' understanding of and confidence in financial
reporting.
b. Practical problems should be more quickly
solvable by reference to an existing conceptual framework.
c. A coherent set of accounting standards and
rules should result.
d. Business entities will need far less
assistance from accountants because the financial reporting process will be
quite easy to apply.
26. In
the conceptual framework for financial reporting, what provides "the
why"--the purpose of accounting?
a. Recognition,measurement, and disclosure
concepts such as assumptions, principles, and constraints
b. Qualitative characteristics of accounting
information
c. Elements of financial statements
d. Objective of financial reporting
27. The
underlying theme of the conceptual framework is
a. decision usefulness.
b. understandability.
c. faithful representation.
d. comparability.
28. Which
of the following is not an objective
of financial reporting?
a. To provide information about economic
resources, the claims to those resources, and the changes in them.
b. To provide information that is helpful to
investors and creditors and other users in assessing the amounts, timing, and
uncertainty of future cash flows.
c. To provide information that is useful to
those making investment and credit decisions.
d. All of these are objectives of financial
reporting.
P29. The
objectives of financial reporting include all of the following except to
provide information that
a. is useful to the Internal Revenue Service in
allocating the tax burden to the business community.
b. is useful to those making investment and
credit decisions.
c. is helpful in assessing future cash flows.
d. identifies the economic resources (assets),
the claims to those resources (liabilities), and the changes in those resources
and claims.
30. What is a primary objective of financial reporting as indicated
in the conceptual framework?
a. provide information that is useful to those
making investing and credit decisions.
b. provide information that is useful to
management.
c. provide information about those investing in
the entity.
d. All of the above.
31. What is a primary objective of financial reporting as indicated
in the conceptual framework?
a. Provide information that is helpful to
present and potential investors, creditors, and other users in assessing the
amounts, timing, and uncertainty of future cash flows.
b. Provide information that is helpful to
present investors, creditors, and other users in assessing the amounts, timing,
and uncertainty of future cash flows.
c. Provide information that is helpful to
potential investors, creditors, and other users in assessing the amounts,
timing, and uncertainty of future cash flows.
d. None of the above.
32. Which of the following is a fundamental characteristic of useful
accounting information?
a. Comparability.
b. Relevance.
c. Neutrality.
d. Materiality.
33. Which of the following is a primary characteristic of useful
accounting information?
a. Conservatism.
b. Comparability.
c. Faithful representation.
d. Consistency.
34. What is meant by comparability when discussing financial
accounting information?
a. Information has predictive or confirmatory
value.
b. Information is reasonably free from error.
c. Information that is measured and reported in
a similar fashion across companies.
d. Information is timely.
35. What is meant by consistency when discussing financial
accounting information?
a. Information that is measured and reported in
a similar fashion across points in time.
b. Information is timely.
c. Information is measured similarly across the
industry.
d. Information is verifiable.
36. Which of the following is an ingredient of relevance?
a. Verifiability.
b. Neutrality.
c. Timeliness.
d. Materiality.
37. Which of the following is an ingredient of faithful
representation?
a. Predictive value.
b. Materiality.
c. Neutrality.
d. Confirmatory value.
38. Changing the method of inventory valuation should be reported in
the financial statements under what qualitative characteristic of accounting
information?
a. Consistency.
b. Verifiability.
c. Timeliness.
d. Comparability.
39. Company A issuing its annual financial reports within one month
of the end of the year is an example of which ingredient of fundamental quality
of accounting information?
a. Neutrality.
b. Timeliness.
c. Predictive value.
d. Completeness.
40. What is the quality of information that enables users to better
forecast future operations?
a. Faithful representation.
b. Materiality.
c. Timeliness.
d. Relevance.
41. Neutrality is an ingredient of which fundamental quality of
information?
a. Faithful representation.
b. Comparability.
c. Relevance.
d. Understandability.
42. If the FIFO inventory method was used last period, it should be
used for the current and following periods because of
a. relevance.
b. neutrality.
c. understandability.
d. consistency.
43. The pervasive criterion by which accounting information can be
judged is that of
a. decision usefulness.
b. freedom from bias.
c. timeliness.
d. comparability.
44. The two fundamental qualities that make accounting information
useful for decision making are
a. comparability and timeliness.
b. materiality and neutrality.
c. relevance and faithful representation.
d. faithful representation and comparability.
45. Accounting information is considered to be relevant when it
a. can be depended on to represent the economic
conditions and events that it is intended to represent.
b. is capable of making a difference in a
decision.
c. is understandable by reasonably informed
users of accounting information.
d. is verifiable and neutral.
46. The quality of information that means the numbers and
descriptions match what really existed or happened is
a. relevance.
b. faithful representation.
c. completeness.
d. neutrality.
47. Which of the following does not relate to relevance?
a. Materiality
b. Predictive value
c. Confirmatory value
d. All of these
48. According to Statement of Financial Accounting Concepts
No. 2, materiality is an ingredient of the fundamental quality of
Relevance Faithful Representation
a. Yes Yes
b. No Yes
c. Yes No
d. No No
49. According to Statement of
Financial Accounting Concepts No. 2, completeness is an ingredient of the
fundamental quality of
Relevance Faithful Representation
a. Yes No
b. Yes Yes
c. No No
d. No Yes
50. According to Statement of
Financial Accounting Concepts No. 2, neutrality is an ingredient of the
fundamental quality of
Relevance Faithful Representation
a. Yes Yes
b. No Yes
c. Yes No
d. No No
51. Neutrality means that information
a. provides benefits which are at least equal to
the costs of its preparation.
b. can be compared with similar information
about an enterprise at other points in time.
c. would have no impact on a decision maker.
d. cannot favor one set of interested parties
over another.
52. The characteristic that is demonstrated when a high degree of
consensus can be secured among independent measurers using the same measurement
methods is
a. relevance.
b. faithful representation.
c. verifiability.
d. neutrality.
53. According to Statement of Financial
Accounting Concepts No. 2, predictive value is an ingredient of the
fundamental quality of
Relevance Faithful Representation
a. Yes No
b. Yes Yes
c. No No
d. No Yes
54. Under Statement of
Financial Accounting Concepts No. 2, free from error is an ingredient of
the fundamental quality of
Faithful
Representation Relevance
a. Yes Yes
b. No Yes
c. Yes No
d. No No
55. Financial information does not demonstrate consistency when
a. firms in the same industry use different
accounting methods to account for the same type of transaction.
b. a company changes its estimate of the salvage
value of a fixed asset.
c. a company fails to adjust its financial
statements for changes in the value of the measuring unit.
d. none of these.
56. Financial information exhibits the characteristic of consistency
when
a. expenses are reported as charges against revenue in the period in which
they are paid.
b. companies apply the same
accounting treatment to similar events, from period to period.
c. extraordinary gains and losses
are not included on the income statement.
d. accounting procedures are
adopted which give a consistent rate of net income.
57. Information about different companies and about different
periods of the same company can be prepared and presented in a similar manner.
Comparability and consistency are related to which of these objectives?
Comparability Consistency
a. companies companies
b. companies Periods
c. Periods companies
d. Periods Periods
58. When information about two different enterprises has been
prepared and presented in a similar manner, the information exhibits the
characteristic of
a. relevance.
b. faithful representation.
c. consistency.
d. none of these.
59. The elements of financial statements include investments by
owners. These are increases in an entity's net assets resulting from owners'
a. transfers of assets to the entity.
b. rendering services to the entity.
c. satisfaction of liabilities of the entity.
d. all of these.
60. In classifying the elements of financial statements, the primary
distinction between revenues and gains is
a. the materiality of the amounts involved.
b. the likelihood that the transactions involved
will recur in the future.
c. the nature of the activities that gave rise
to the transactions involved.
d. the costs versus the benefits of the
alternative methods of disclosing the transactions involved.
61. A decrease in net assets arising from peripheral or incidental
transactions is called a(n)
a. capital expenditure.
b. cost.
c. loss.
d. expense.
62. One of the elements of financial statements is comprehensive
income. As described in Statement of
Financial Accounting Concepts No. 6, "Elements of Financial
Statements," comprehensive income is equal to
a. revenues minus expenses plus gains minus
losses.
b. revenues minus expenses plus gains minus
losses plus investments by owners minus distributions to owners.
c. revenues minus expenses plus gains minus
losses plus investments by owners minus distributions to owners plus assets minus
liabilities.
d. none of these.
63. Which of the following elements of financial statements is not a
component of compre-hensive income?
a. Revenues
b. Distributions to owners
c. Losses
d. Expenses
P64. Which
of the following is false with regard to the element "comprehensive
income"?
a. It is more inclusive than the traditional
notion of net income.
b. It includes net income and all other changes
in equity exclusive of owners' invest-ments and distributions to owners.
c. This concept is not yet being applied in
practice.
d. It excludes prior period adjustments
(transactions that relate to previous periods, such as corrections of errors).
S65. According
to the FASB conceptual framework, which of the following elements describes
transactions or events that affect a company during a period of time?
a. Assets.
b. Expenses.
c. Equity.
d. Liabilities.
S66. According
to the FASB Conceptual Framework, the elements¾assets,
liabilities, and equity¾describe amounts of resources and
claims to resources at/during a
Moment in Time Period of Time
a. Yes No
b. Yes Yes
c. No Yes
d. No No
67. Which
of the following is not a basic element of financial statements?
a. Assets.
b. Balance sheet.
c. Losses.
d. Revenue.
68. Which
of the following basic elements of financial statements is more associated with
the balance sheet than the income statement?
a. Equity.
b. Revenue.
c. Gains.
d. Expenses.
69. Issuance
of common stock for cash affects which basic element of financial statements?
a. Revenues.
b. Losses.
c. Liabilities.
d. Equity.
70. Which
basic element of financial statements arises from peripheral or incidental
transactions?
a. Assets.
b. Liabilities.
c. Gains.
d. Expenses.
71. Which
of the following is not a basic assumption underlying the financial accounting
structure?
a. Economic entity assumption.
b. Going concern assumption.
c. Periodicity assumption.
d. Historical cost assumption.
72. Which
basic assumption is illustrated when a firm reports financial results on an
annual basis?
a. Economic entity assumption.
b. Going concern assumption.
c. Periodicity assumption.
d. Monetary unit assumption.
73. Which
basic assumption may not be followed when a firm in bankruptcy reports
financial results?
a. Economic entity assumption.
b. Going concern assumption.
c. Periodicity assumption.
d. Monetary unit assumption.
74. Which
accounting assumption or principle is being violated if a company provides
financial reports in connection with a new product introduction?
a. Economic entity.
b. Periodicity.
c. Revenue recognition.
d. Full disclosure.
S75. Which
of the following basic accounting assumptions is threatened by the existence of
severe inflation in the economy?
a. Monetary unit assumption.
b. Periodicity assumption.
c. Going-concern assumption.
d. Economic entity assumption.
S76. During
the lifetime of an entity accountants produce financial statements at
artificial points in time in accordance with the concept of
Relevance Periodicity
a. No No
b. Yes No
c. No Yes
d. Yes Yes
77. Under
current GAAP, inflation is ignored in accounting due to the
a. economic entity assumption.
b. going concern assumption.
c. monetary unit assumption.
d. periodicity assumption.
78. The economic entity assumption
a. is inapplicable to unincorporated businesses.
b. recognizes the legal aspects of business
organizations.
c. requires periodic income measurement.
d. is applicable to all forms of business
organizations.
79. Preparation of consolidated financial statements when a
parent-subsidiary relationship exists is an example of the
a. economic entity assumption.
b. relevance characteristic.
c. comparability characteristic.
d. neutrality characteristic.
80. During the lifetime of an entity, accountants produce financial
statements at arbitrary points in time in accordance with which basic
accounting concept?
a. Cost constraint
b. Periodicity assumption
c. Conservatism constraint
d. Expense recognition principle
81. What accounting concept justifies the usage of depreciation and
amortization policies?
a. Going concern assumption
b. Fair value principle
c. Full disclosure principle
d. Monetary unit assumption
82. The assumption that a company will not be sold or liquidated in
the near future is known as the
a. economic entity assumption.
b. monetary unit assumption.
c. periodicity assumption.
d. none of these.
83. Which of the following is an implication of the going concern
assumption?
a. The historical cost principle is credible.
b. Depreciation and amortization policies are
justifiable and appropriate.
c. The current-noncurrent classification of
assets and liabilities is justifiable and signify-cant.
d. All of these.
84. Proponents of historical cost ordinarily maintain that in
comparison with all other valuation alternatives for general purpose financial
reporting, statements prepared using historical costs are more
a. faithfully representative.
b. relevant.
c. indicative of the entity's purchasing power.
d. conservative.
85. Valuing assets at their liquidation values rather than their
cost is inconsistent with the
a. periodicity assumption.
b. expense recognition principle.
c. materiality constraint.
d. historical cost principle.
86. Revenue is generally recognized when realized or realizable and
earned. This statement describes the
a. consistency characteristic.
b. expense recognition principle.
c. revenue recognition principle.
d. relevance characteristic.
87. Generally, revenue from sales should be recognized at a point
when
a. management decides it is
appropriate to do so.
b. the product is available for
sale to the ultimate consumer.
c. the entire amount receivable
has been collected from the customer and there remains no further warranty
liability.
d. none of these.
88. Revenue generally should be recognized
a. at the end of production.
b. at the time of cash collection.
c. when realized.
d. when realized or realizable and earned.
89. Which of the following is not
a time when revenue may be recognized?
a. At time of sale
b. At receipt of cash
c. During production
d. All of these are possible times of revenue
recognition.
90. Which of the following is the process of converting assets
received or held into cash or claims to cash?
a. Recognition
b. Measurement
c. Realization
d. Allocation
91. "When products (goods or services), merchandise, or other
assets are exchanged for cash or claims to cash" is a definition of
a. allocated.
b. realized.
c. realizable.
d. earned.
92. The allowance for doubtful accounts, which appears as a
deduction from accounts receivable on a balance sheet and which is based on an
estimate of bad debts, is an application of the
a. consistency characteristic.
b. expense recognition principle.
c. materiality constraint.
d. revenue recognition principle.
93. The accounting principle of expense recognition is best demonstrated by
a. not recognizing any expense unless some
revenue is realized.
b. associating effort (expense) with
accomplishment (revenue).
c. recognizing prepaid rent received as revenue.
d. establishing an Appropriation for Contingencies
account.
94. Which of the following serves as the justification for the
periodic recording of depreciation expense?
a. Association of efforts (expense) with
accomplishments (revenue)
b. Systematic and rational allocation of cost
over the periods benefited
c. Immediate recognition of an expense
d. Minimization of income tax liability
95. Application of the full disclosure principle
a. is theoretically desirable but not practical
because the costs of complete disclosure exceed the benefits.
b. is violated when important financial
information is buried in the notes to the financial statements.
c. is demonstrated by the use of supplementary
information presenting the effects of changing prices.
d. requires that the financial statements be
consistent and comparable.
96. Which of the following is an argument against using historical
cost in accounting?
a. Fair values are more relevant.
b. Historical costs are based on an exchange
transaction.
c. Historical costs are reliable.
d. Fair values are subjective.
97. When is revenue generally recognized?
a. When cash is received.
b. When the warranty expires.
c. When production is completed.
d. When the sale occurs.
98. Which of the following are the two components of the revenue
recognition principle?
a. Cash is received and the amount is material.
b. Recognition occurs when and earned realized
or realizable.
c. Production is complete and there is an active
market for the product.
d. Cash is realized or realizable and production
is complete.
99. Which of the following practices may not be an acceptable
deviation from recognizing revenue at the point of sale?
a. Upon receipt of cash.
b. During production.
c. Upon receipt of order.
d. End of production.
100. Which of the following is not a required component of financial
statements prepared in accordance with generally accepted accounting
principles?
a. President's letter to shareholders.
b. Balance sheet.
c. Income statement.
d. Notes to financial statements.
101. What is the general approach as to when product costs are
recognized as expenses?
a. In the period when the expenses are paid.
b. In the period when the expenses are incurred.
c. In the period when the vendor invoice is
received.
d. In the period when the related revenue is
recognized.
102. Not adjusting the amounts reported in the financial statements
for inflation is an example of which basic principle of accounting?
a. Economic entity.
b. Going concern.
c. Historical cost.
d. Full disclosure.
103. Recognition of expense related to amortization of an intangible
asset illustrates which principle of accounting?
a. Expense recognition.
b. Full disclosure.
c. Revenue recognition.
d. Historical cost.
104. When should an expenditure be recorded as an asset rather than
an expense?
a. Never.
b. Always.
c. If the amount is material.
d. When future benefit exits.
105. Which accounting assumption or principle is being violated if a
company reports its corporate headquarter building at its fair value on the
balance sheet?
a. Going concern.
b. Monetary unit.
c. Historical cost.
d. Full disclosure.
106. Which accounting assumption or principle is being violated if a
company is a party to major litigation that it may lose and decides not to
include the information in the financial statements because it may have a
negative impact on the company's stock price?
a. Full disclosure.
b. Going concern.
c. Historical cost.
d. Expense recognition.
107. Which assumption or principle requires that all information
significant enough to affect a decision of reasonably informed users should be
reported in the financial statements?
a. Matching.
b. Going concern.
c. Historical cost.
d. Full disclosure.
108. A company has a factory building that originally cost the
company $250,000. The current fair value of the factory building is $3 million.
The president would like to report the difference as a gain. The write-up would
represent a violation of which accounting assumption or principle?
a. Revenue recognition.
b. Going concern.
c. Historical cost.
d. Monetary unit.
109. Which of the following is a constraint in presenting financial
information?
a. Industry practice.
b. Full disclosure.
c. Relevance.
d. Consistency.
110. All of the following represent costs of providing financial
information except
a. preparing.
b. disseminating.
c. accessing capital.
d. auditing.
111. Which of the following are
benefits of providing financial information?
a. Potential litigation.
b. Auditing.
c. Disclosure to competition.
d. Improved allocation of resources.
112. Where is materiality not used in providing financial
information?
a. Applying the revenue recognition principle.
b. Determining what items to include in the
financial statements.
c. Applying the going concern assumption.
d. Determining the level of disclosure.
113. What is prudence or conservatism?
a. Understating assets and net income.
b. When in doubt, recognizing the option that is
least likely to overstate assets and income.
c. Recognizing the option that is least likely
to overstate assets and income.
d. Recognizing revenue when earned and realized.
114. Expensing the cost of copy paper when the paper is acquired is
an example of which constraint?
a. Materiality.
b. Cost.
c. Conservatism.
d. Industry practices.
115. Which of the following statements
concerning the cost-benefit relationship is not true?
a. Business reporting should exclude information
outside of management's expertise.
b. Management should not be required to report
information that would significantly harm the company's competitive position.
c. Management should not be required to provide
forecasted financial information.
d. If needed by financial statement users,
management should gather information not included in the financial statements
that would not otherwise be gathered for
internal use.
116. Which of the following relates to both relevance and faithful
representation?
a. Cost constraint
b. Predictive value
c. Verifiability
d. Neutrality
117. Charging off the cost of a wastebasket with an estimated useful
life of 10 years as an expense of the period when purchased is an example of
the application of the
a. consistency characteristic.
b. expense recognition principle.
c. materiality characteristic.
d. historical cost principle.
118. Which of the following
statements about materiality is not
correct?
a. An item must make a difference or it need not
be disclosed.
b. Materiality is a matter of relative size or
importance.
c. An item is material if its inclusion or
omission would influence or change the judgment of a reasonable person.
d. All of these are correct
statements about materiality.
119. Which of the following are considered pervasive constraints by Statement of Financial Accounting Concepts
No. 2?
a. Cost-constraint relationship and conservatism
b. Timeliness and feedback value
c. Conservatism and verifiability
d. Materiality and cost-constraint relationship
120. The basic accounting concept that refers to the tendency of
accountants to resolve uncertainty in favor of understating assets and revenues
and overstating liabilities and expenses is known as
a. prudence or conservatism.
b. the materiality constraint.
c. the substance over form principle.
d. the industry practices constraint.
121. Following the peculiar nature of some business concerns, which sometimes
requires departure from basic theory is known as
a. the economic entity assumption.
b. industry practices.
c. the cost constraint.
d. the going concern assumption.
122. Trade-offs between the characteristics that make information
useful may be necessary or beneficial. Issuance of interim financial statements
is an example of a trade-off between
a. relevance and faithful representation.
b. faithful representation and periodicity.
c. timeliness and materiality.
d. understandability and timeliness.
123. Allowing
firms to estimate rather than physically count inventory at interim (quarterly)
periods is an example of a trade-off between
a. verifiability and faithful representation.
b. faithful representation and comparability.
c. timeliness and verifiability.
d. neutrality and consistency.
P124. In matters of doubt and great uncertainty, accounting issues
should be resolved by choosing the alternative that has the least favorable
effect on net income, assets, and owners' equity. This guidance comes from
a. the cost constraint.
b. the industry practices constraint.
c. prudence or conservatism.
d. the full disclosure principle.
Multiple Choice
Answers—Conceptual
Solutions to those Multiple Choice questions for which the answer is
“none of these.”
55. a company changes its inventory method every few years in order
to maximize reported income (other answers are possible).
58. comparability.
62. change in equity of an entity during a period from transactions
and other events and circumstances from nonowner sources.
82. going concern assumption.
87. an exchange has taken place and the earnings process is
virtually complete.
Multiple
Choice—CPA
Adapted
125. According to the FASB's conceptual framework, predictive value
is an ingredient of
Relevance Faithful Representation
a. Yes No
b. Yes Yes
c. No Yes
d. No No
126. According to the FASB's conceptual framework, which of the
following relates to both relevance and faithful representation?
Comparability Neutrality
a. Yes Yes
b. Yes No
c. No Yes
d. No No
127. The FASB's conceptual framework classifies gains and losses
based on whether they are related to an entity's major ongoing or central
operations. These gains or losses may be classified as
Nonoperating Operating
a. Yes No
b. Yes Yes
c. No Yes
d. No No
128. According to the FASB's conceptual framework, earnings
a. is the same as comprehensive income.
b. excludes certain gains and losses that are
included in comprehensive income.
c. includes certain gains and losses that are
excluded from comprehensive income.
d. includes certain losses that are excluded
from comprehensive income.
129. According to the FASB's conceptual framework, comprehensive
income includes which of the following?
Operating Income Investments
by Owners
a. Yes No
b. Yes Yes
c. No Yes
d. No No
130. According to the FASB's conceptual framework, the calculation of
comprehensive income includes which of the following?
Income from Distributions
Continuing Operations to Owners
a. No No
b. Yes No
c. Yes Yes
d. No Yes
131. According to the FASB's conceptual framework, comprehensive
income includes which of the following?
Gross Margin Operating Income
a. No Yes
b. No No
c. Yes No
d. Yes Yes
132. Under Statements of Financial Accounting Concepts, comprehensive
income includes which of the following?
Gains Gross Margin
a. No No
b. No Yes
c. Yes No
d. Yes Yes
133. According
to the FASB's conceptual framework, the process of reporting an item in the
financial statements of an entity is
a. recognition.
b. realization.
c. allocation.
d. matching.
Multiple Choice Answers—CPA
Adapted
IFRS QUESTIONS
True
/ False
1. The
conceptual framework underlying U.S. GAAP is similar to that underlying IFRS.
2. The FASB conceptual framework specifically
identifies accrual basis accounting as one of its fundamental assumptions.
3. One of two assumptions made by the IASB
conceptual framework is that the reporting entity is a going concern.
4. One of the challenges in developing a common
conceptual framework will be to agree on how the framework should be organized
since the FASB and IASB conceptual frameworks are organized in very different
ways.
5. One issue that the IASB and FASB must resolve
in developing a common conceptual framework is how control should be defined with
regard to the definition of an asset.
Answers to True / False questions:
Multiple Choice Questions:
1. Which
of the following statements regarding the IASB and FASB conceptual frameworks
is not correct?
a. The existing IASB and FASB conceptual frameworks
are organized in similar ways.
b. The two assumptions of the IASB framework are
that the financial statements are prepared on an accrual basis and that the
reporting entity is a going concern.
c. The FASB and IASB agree that the sole
objective of financial reporting is to provide users with information that is
useful for decision-making.
d. The FASB conceptual framework discusses the
concept of accrual basis accounting in detail, but does not specifically
identity it as an assumption.
2. The
issues which the FASB and IASB must address in developing a common conceptual
framework include all of the following except:
a. Should the common framework lead to standards
that are principles-based or rules-based?
b. Should the role of financial reporting focus
on stewardship as well as providing information to assist users in decision
making?
c. Should the characteristic of reliability be
traded-off in favor of information that is verifiable?
d. Should a single measurement method such as
historical cost be used?
Answers
to Multiple Choice:
Short
Answer:
1. What
two assumptions are central to the IFRS conceptual framework?
2. Do
the IFRS and U.S. GAAP conceptual frameworks differ in terms of the role of
financial reporting? Explain.
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