ACC 563 Week 5 Midterm Exam – Strayer NEW
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Week 5 Midterm Exam: Chapters 1 Through 7
Chapter 1
Multiple Choice:
1. Which of the following bodies has the ultimate authority to issue accounting pronouncements in the United States?
a. Securities and Exchange Commission
b. Financial Accounting Standards Board
c. International Accounting Standards Committee
d. Internal Revenue Service
Answer
2. What historical evidence of the business operations of the private estate of Apollonius was discovered early inthe20th century?
a. The Iliad
b. Plato's Republic
c. The Zenon papyri
d. Pacioli’s work, Summa de Arithmetica Geometria Proportioni et Proportionalita,
Answer
3. Who has been given credit or developing the double-entry system of bookkeeping?
a. Francis Wheat
b. Fra Luca Pacioli
c. A. C. Littleton
d. William Paton
Answer
4. Which of the following was not a criticism of the development of accounting standards by the Accounting Principles Board?
a. The independence of the members of the APB. The individuals serving on the board had full-time responsibilities elsewhere that might influence their views of certain issues.
b. The structure of the board. The largest eight public accounting firms (at that time) were automatically awarded one member, and there were usually five or six other public accountants on the APB.
c. Harmonization. The accounting standards developed were dissimilar to those developed by the International Accounting Standards Committee.
d. Response time. The emerging accounting problems were not being investigated and solved quickly enough by the part-time members.
Answer
5. Which of the following is the professional organization of university accounting professors?
a. American Accounting Association
b. American Institute of Certified Public Accountants
c. American Institute of Accountants
d. Financial Executives Institute
Answer
6. What controversy originally highlighted the need for standard setting groups to have more authority?
a. Accounting for stock options
b. Accounting for derivatives
c. Accounting for marketable securities
d. Accounting for the investment tax credit
Answer
7. Which of the following committees recommended abolishing the Accounting Principles Board and replacing it with the Financial Accounting Board ?
a. Wheat
b. Cohen
c. Trueblood
d. Anderson
Answer
8. Which of the following is a public sector accounting standard setter?
a. FASB
b. SEC
c. APB
d. CAP
Answer
9. Which of the following types of pronouncements now establishes generally accepted accounting principles?
a. Statements of Concepts
b. Statements of Financial Accounting Standards
c. APB Opinions
d. Accounting Standards Updates
Answer
10. Which of the following types of pronouncements are intended to establish the objectives and concepts that the FASB will use in developing standards of financial accounting and reporting?
a. Statements of Concepts
b. Statements of Financial Accounting Standards
c. APB Opinions
d. Accounting Standards Updates
Answer
11. Which of the following is not a consequence of the standards overload problem to small businesses?
a. If a small business omits a GAAP requirement from audited financial statements, a qualified or adverse opinion may be rendered.
b. Small businesses do not need to keep financial records
c. The cost of complying with GAAP requirements may cause a small business to forgo the development of other, more relevant information.
d. Small CPA firms that audit smaller companies must keep up to date on all the same requirements as large international firms, but they cannot afford the specialists that are available on a centralized basis in the large firms.
Answer
12. Some accountants maintain that accounting standards are as much a product of political action as they are of careful logic or empirical findings. This belief is an example of the concept of
a. Standard setting as apolitical process
b. Standards overload
c. Economic consequences
d. The role of ethics in accounting
Answer
13. T he impact of accounting reports on various segments of our economic society is the definition of the concept of
a. Standard setting as apolitical process
b. Standards overload
c. Economic consequences
d. The role of ethics in accounting
Answer
14. Considering and understanding how business decisions affect the financial statements is
a. The sole responsibility of the Securities and Exchange Commission.
b. Provided in the auditor’s report.
c. Referred to as an economic consequence perspective.
d. Interpreted strictly by the company’s suppliers.
Answer
15. Which of the following is a source of nonauthoritative accounting guidance and literature?
a. Financial Accounting Standards Board Statements
b. Financial Accounting Standards Board Interpretations
c. Financial Accounting Standards Board Technical Bulletins
d. Practices that are widely recognized and prevalent either generally or in the industry
Answer
16. Which of the following companies was involved in an accounting failure that caused the public accounting firm Arthur Andersen to gout of business?
a. Goldman Sachs
b. Wachovia
c. Enron
d. AIG
Answer
Essay
1. What is the difference between normative and positive theory?
2. Why is the development of a general theory of accounting important
3. Discuss the evolution of accounting during the 1930s.
4. Discuss the evolution of the three private sector accenting standard setting organizations.
5. What were the purposes of the Wheat and Trueblood committees?
6. What was the purpose of the GAAP Hierarchy?
7. What were the four types of pronouncements issued by the FASB?
8. Discuss why standard setting may be viewed as a political process.
9. Define the following terms
10. Discuss the evolution of the phrase “generally accepted accounting principles.
11. What controversy caused the AICPA to issue Rule 203 that requires companies to use GAAP when issuing financial statements?
12. Discuss the FASB ASC including the reasons for its adoption and the FASB’s goals in developing it..
13. Discuss the role of ethics in accounting.
14. What is a special purpose entity and how do they work?
15. How did the Sarbanes-Oxley Act change the way the FASB is funded?
16. Discuss the objectives of the International Accounting Standards Board.
Chapter 2
Multiple Choice
1. Which early accounting theorist was among the first to express the view that all changes in the value of assets and liabilities should be reflected in the financial statements ?\
a. A. C. Littleton
b. John Canning
c. William Paton
d. DR Scott
Answer
2. Which of the following economists most influenced the views of DR Scott?
a. Thorstein Veblen
b. John Hicks
c. Karl Marx
d. John Smith
Answer
3. Which of the following is not one of DR Scott’s hierarchy of accounting postulates and principles?
a. Orientation postulate.
b. The principles of truth and fairness.
c. The materiality principle
d. The principles of adaptability and consistency.
Answer
4. Which of the following organizations published the monograph titled A Tentative Statement of Accounting Principles Affecting Annual Corporate Reports
a. SEC
b. AAA
c. AIA
d. NAA
Answer
5. Which of the following organizations published the monograph titled A Statement of Accounting Principles?
a. SEC
b. AAA
c. AIA
d. NAA
Answer
6. Who was the author of Accounting Research Study No. 1, The Basic Postulates of Accounting?
a. Robert Sprouse
b. Maurice Moonitz
c. Alvin Jennings\
d. Thomas Hatfield
Answer
7. Which of the following is not an approaches to accounting theory AS categorized by Statement on Accounting Theory and Theory Acceptance?
a. Classical,
b. Neoclassical
c. Decision usefulness
d. Information economics.
Answer
8. Under Statement of Financial Accounting Concepts No. 2, feedback value is an ingredient of the primary quality o
Relevance Reliability
a. No No
b. No Yes
c. Yes Yes
d. Yes No
Answer
9. Under Statement of Financial Accounting Concepts No. 2, which of the following interacts with both relevance and reliability to contribute to the usefulness of information?
a. Comparability
b. Timeliness
c. Neutrality
d. Predictive value
Answer
10. Which of the following hierarchy of qualities did Statement of Financial Accounting Concepts No. 2 indicate as being most important?
a. Relevance
b. Reliability
c. Verifiability
d. Decision usefulness
Answer
11. Which of the following is considered a pervasive constraint by Statement of Financial Accounting Concepts No. 2
a. Benefits>costs
b. Conservatism
c. Timeliness
d. Verifiability
Answer
12. Under Statement of Financial Accounting Concepts No. 2, which of the following is an ingredient of the primary quality of relevance?
a. Predictive value
b. Materiality
c. Understandability
d. Verifiability
Answer
13. Under Statement of Financial Accounting Concepts No. 2, which of the following is an ingredient of the primary quality of reliability?
a. Understandability
b. Verifiability
c. Predictive value
d. Materiality
Answer
14. Under Statement of Financial Accounting Concepts No. 2, the ability through consensus of measures to ensure that information represents what it purports to represent is an example of the concept of
a. Relevance
b. Verifiability
c. Representational faithfulness
d. Feedback value
Answer
15. Under Statement of Financial Accounting Concepts No. 2, which of the following relates to both relevance and reliability?
a. Timeliness
b. Materiality
c. Verifiability
d. Neutrality
Answer
16. Which of the following is not a qualitative characteristic associated with reliability?
a. Verifiable
b. Conservatism
c. Neutral
d. Faithful representation
Answer
17. An item is considered material if
a. It doesn’t costs a lot of money.
b. It is of a tangible good.
c. It is likely to influence the
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