63 test bank for intermediate accounting 14th

63 Test Bank for Intermediate Accounting 14th
Edition by Kieso
Multiple Choice Questions
When making decisions, investors are interested in assessing
1.
2.

a.the company’s ability to generate net cash inflows.
b.management’s ability to protect and enhance the capital providers’
investments.
3. c.Both a and b.
4. d.the company’s ability to generate net income.

An effective capital allocation process
1.
2.
3.
4.

a.promotes productivity.
b.encourages innovation.
c.provides an efficient market for buying and selling securities.
d.all of these.

What is the objective of financial reporting?
1.
2.
3.

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.
4. d.Provide information that excludes claims to the resources.

The passage of a new FASB Standards Statement requires the
support of
1.
2.
3.
4.

a.all Board members.
b.three Board members.
c.four Board members.
d.five Board members.

How does accounting help the capital allocation process attract
investment capital?
1.
2.
3.
4.

a.Provides timely, relevant information.
b.Encourages innovation.
c.Promotes productivity.
d.a and b above.

All the following are differences between financial and managerial
accounting in how accounting information is used except to

1.
2.

a.plan and control company's operations.
b.decide whether to invest in the company.


3.
4.

c.evaluate borrowing capacity to determine the extent of a loan to grant.
d.All the above.

A characteristic of generally accepted accounting principles
include the following:
1.
2.
3.
4.

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.

Which organization is responsible for issuing Emerging Issues
Task Force Statements?
1.
2.

3.
4.

a.FASB
b.CAP
c.APB
d.SEC

The information provided by financial reporting pertains to
1.

a.individual business enterprises, rather than to industries or an economy
as a whole or to members of society as consumers.
2. b.business industries, rather than to individual enterprises or an economy
as a whole or to members of society as consumers.
3. c.individual business enterprises, industries, and an economy as a whole,
rather than to members of society as consumers.
4. d.an economy as a whole and to members of society as consumers, rather
than to individual enterprises or industries.

Why did the AICPA create the Accounting Principles Board?
1.
2.

a.The SEC disbanded the previous standard setting organization.
b.The previous standard setting organization did not provide a structured
set of accounting principles.
3. c.No such organization existed in the past.
4. d.None of the above.

Accrual accounting is used because
1.
2.

a.cash flows are considered less important.
b.it provides a better indication of ability to generate cash flows than the
cash basis.
3. c.it recognizes revenues when cash is received and expenses when cash is
paid.
4. d. none of the above.

Users of financial reports include all of the following except
1.
2.

a.creditors.
b.government agencies.


3.
4.

c.unions.
d.All of these are users.

Which of the following organizations has been responsible for
setting U.S. accounting standards?
1.
2.
3.

4.

a.Accounting Principles Board.
b.Committee on Accounting Procedure.
c.Financial Accounting Standards Board.
d.All of the above.

Which organization was responsible for issuing Accounting
Research Bulletins?
1.
2.
3.
4.

a.Accounting Principles Board.
b.Committee on Accounting Procedure.
c.The SEC.
d.AICPA.

Whether a business is successful and thrives is determined by
1.
2.
3.
4.

a.markets.
b.free enterprise.
c.competition.
d.all of these.

The financial statements most frequently provided include all of
the following except the
1.
2.
3.
4.

a.balance sheet.
b.income statement.
c.statement of cash flows.
d.statement of retained earnings.

Why was it believed that accounting standards that were issued
by the Financial Accounting Standards Board would carry more
weight?
1.
2.
3.
4.

a.Smaller membership.
b.FASB board members are well-paid.
c.FASB board members must be CPAs.
d.Due process.

The role of the Securities and Exchange Commission in the
formulation of accounting principles can be best described as
1.
2.
3.

4.

a.consistently primary.
b.consistently secondary.
c.sometimes primary and sometimes secondary.
d.non-existent.


General-purpose financial statements are the product of
1.
2.
3.
4.

a.financial accounting.
b.managerial accounting.
c.both financial and managerial accounting.
d.neither financial nor managerial accounting.

Which of the following is not a major challenge facing the
accounting profession?
1.
2.
3.
4.

a.Nonfinancial measurements.
b.Timeliness.
c.Accounting for hard assets.
d.Forward-looking information.

Which of the following is a general limitation of "general purpose
financial statements"?
1.

a.General purpose financial statements may not be the most informative for
a specific enterprise.
2. b.General purpose financial statements are comparable.
3. c.General purpose financial statements are assumed to present fairly the
company's financial operations.
4. d.None of the above.

Primary users for general-purpose financial statements include
1.
2.
3.
4.

a.creditors.
b.employees.
c.investors.
d.both creditors and investors.

Which of the following represents a form of communication
through financial reporting but not through financial statements?
1.
2.
3.
4.
5.

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

What is the relationship between the Securities and Exchange
Commission and accounting standard setting in the United
States?
1.

a.The SEC requires all companies listed on an exchange to submit their
financial statements to the SEC.


2.

b.The SEC coordinates with the AICPA in establishing accounting
standards.
3. c.The SEC has a mandate to establish accounting standards for enterprises
under its jurisdiction.
4. d.The SEC reviews financial statements for compliance.

Which perspective is adopted as part of the objective of generalpurpose financial reporting?
1.
2.
3.

4.

a.Decision-usefulness perspective.
b.Proprietary perspective.
c.Entity perspective.
d.Financial reporting perspective.

A common set of accounting standards and procedures are
called
1.
2.
3.
4.

a.financial accounting standards.
b.generally accepted accounting principles.
c.objectives of financial reporting.
d.statements of financial accounting concepts.

Characteristics of generally accepted accounting principles
include all of the following except
1.

a.authoritative accounting the rule-making body established a principle of
reporting.
2. b.standards are considered useful by the profession.
3. c.each principle is approved by the SEC.
4. d.practice has become universally accepted over time.

Accounting principles are "generally accepted" only when

1.

a.an authoritative accounting rule-making body has established it in an
official pro-nouncement.
2. b.it has been accepted as appropriate because of its universal application.
3. c.both a and b.
4. d.neither a nor b.

What is the purpose of Emerging Issues Task Force?
1.
2.

a.Provide interpretation of existing standards.
b.Provide a consensus on how to account for new and unusual financial
transactions.
3. c.Provide interpretive guidance.
4. d.Provide timely guidance on select issues.

What is due process in the context of standard setting at the
FASB?
1.

a.FASB operates in full view of the public.


2.
3.
4.

b.Public hearings are held on proposed accounting standards.

c.Interested parties can make their views known.
d.All of the above.

Financial statements in the early 2000s provide information
related to
1.
2.
3.
4.

a.nonfinancial measurements.
b.forward-looking data.
c.hard assets (inventory and plant assets).
d.none of these.

63 Free Test Bank for Intermediate Accounting 14th
Edition by Kieso Multiple Choice Questions - Page 2
The purpose of the Emerging Issues Task Force is to
1.

a.develop a conceptual framework as a frame of reference for the solution
of future problems.
2. b.lobby the FASB on issues that affect a particular industry.
3. c.do research on issues that relate to long-term accounting problems.
4. d.issue statements which reflect a consensus on how to account for new
and unusual financial transactions that need to be resolved quickly.

The Financial Accounting Standards Board employs a "due
process" system which
1.

2.

a.is an efficient system for collecting dues from members.
b.enables interested parties to express their views on issues under
consideration.
3. c.identifies the accounting issues that are the most important.
4. d.requires that all accountants must receive a copy of financial standards.

What is not a reason that accounting standards may differ across
countries?
1.
2.
3.
4.

a.Governments.
b.Language.
c.Culture.
d.Past Practice.

The following are part of the "due process" system used by the
FASB in the evolution of a typical FASB Statement of Financial
Accounting Standards:1.Exposure Draft; 2.Statement of Financial
Accounting Standards; 3.Preliminary Views. The chronological
order in which these items are released is as follows:
1.
2.

a.1, 2, 3.
b.1, 3, 2.

3.
4.

c.2, 3, 1.
d.3, 1, 2.

Which of the following publications does not qualify as a
statement of generally accepted accounting principles?
1.
2.
3.
4.

a.Statements of financial standards issued by the FASB
b.Accounting interpretations issued by the FASB
c.APB Opinions
d.Accounting research studies issued by the AICPA

Generally accepted accounting principles
1.

a.include detailed practices and procedures as well as broad guidelines of
general application.
2. b.are influenced by pronouncements of the SEC and IRS.
3. c.change over time as the nature of the business environment changes.
4. d.all of these.

The major distinction between the Financial Accounting

Standards Board (FASB) and its predecessor, the Accounting
Principles Board (APB), is
1.
2.

a.the FASB issues exposure drafts of proposed standards.
b.all members of the FASB are fully remunerated, serve full time, and are
independent of any companies or institutions.
3. c.all members of the FASB possess extensive experience in financial
reporting.
4. d.a majority of the members of the FASB are CPAs drawn from public
practice.

The body that has the power to prescribe the accounting
practices and standards to be employed by companies that fall
under its jurisdiction is the
1.
2.
3.
4.

a.FASB.
b.AICPA.
c.SEC.
d.APB.

What is "expectation gap"?
1.

a.The difference between what the public thinks the accountant is not doing

and what the accountant knows they don't do.
2. b.The difference between what the public thinks the accountant is doing
and what Congress says the accountant is doing.
3. c.The difference between what the public thinks the accountant is doing
and what the accountant thinks they can do.
4. d.The difference between what the accountant is doing and what the Courts
say the accountant should be doing.


The Financial Accounting Foundation
1.
2.
3.
4.

a.oversees the operations of the FASB.
b.oversees the operations of the AICPA.
c.provides information to interested parties on financial reporting issues.
d.works with the Financial Accounting Standards Advisory Council to
provide informa-tion to interested parties on financial reporting issues.

Which of the following is not a part of generally accepted
accounting principles?
1.
2.
3.
4.

a.FASB Interpretations
b.CAP Accounting Research Bulletins

c.APB Opinions
d.All of these are part of generally accepted accounting principles.

The Financial Accounting Standards Board (FASB) was proposed
by the
1.
2.
3.
4.

a.American Institute of Certified Public Accountants.
b.Accounting Principles Board.
c.Study Group on the Objectives of Financial Statements.
d.Special Study Group on establishment of Accounting Principles (Wheat
Committee).

Which of the following is not considered a component of generally
accepted accounting principles?
1.
2.
3.
4.

a.FASB Implementation Guides.
b.Widely recognized industry practices.
c.Articles published in CPA journals.
d.AICPA Accounting Interpretations.

What is the purpose of a FASB Staff Position?
1.

2.

a.Provide interpretation of existing standards.
b.Provide a consensus on how to account for new and unusual financial
transactions.
3. c.Provide interpretive guidance.
4. d.Provide timely guidance on select issues.

What would be an advantage of having all countries adopt and
follow the same accounting standards?
1.
2.
3.
4.

a.Consistency.
b.Comparability.
c.Lower preparation costs.
d.b and c

FASB Technical Bulletins


1.

a.are similar to FASB Interpretations in that they establish enforceable
standards under the AICPA's Code of Professional Ethics.
2. b.are issued monthly by the FASB to deal with current topics.
3. c.are not expected to have a significant impact on financial reporting in
general and provide guidance when it does not conflict with any broad

fundamental accounting principle.
4. d.were recently discontinued by the FASB because they dealt with
specialized topics having little impact on financial reporting in general.

Members of the Financial Accounting Standards Board are
1.

a.employed by the American Institute of Certified Public Accountants
(AICPA).
2. b.part-time employees.
3. c.required to hold a CPA certificate.
4. d.independent of any other organization.

The Financial Accounting Standards Board
1.

a.has issued a series of pronouncements entitled Statements on Auditing
Standards.
2. b.was the forerunner of the current Accounting Principles Board.
3. c.is the arm of the Securities and Exchange Commission responsible for
setting financial accounting standards.
4. d.is appointed by the Financial Accounting Foundation.

Rule 203 of the Code of Professional Conduct addresses:
1.
2.

a.ethical requirements.
b.financial statements should be based on generally accepted accounting
principles.

3. c.advertising to obtained clients.
4. d.auditing financial statements.

The most significant current source of generally accepted
accounting principles is the
1.
2.
3.
4.

a.AICPA.
b.SEC.
c.APB.
d.FASB.

Which of the following organizations has not been instrumental in
the development of financial accounting standards in the United
States?
1.
2.
3.
4.

a.AICPA
b.FASB
c.IASB
d.SEC


What is not a source of pressure that may influence the

accounting standard setting process?
1.
2.
3.
4.

a.Congress.
b.Lobbyist.
c.CPA firms.
d.None of the above.

An organization that has not published accounting standards is
the
1.
2.
3.
4.

a.American Institute of Certified Public Accountants.
b.Securities and Exchange Commission.
c.Financial Accounting Standards Board.
d.All of these have published accounting standards.

The purpose of Statements of Financial Accounting Concepts is
to
1.
2.
3.
4.

a.establish GAAP.
b.modify or extend the existing FASB Standards Statement.
c.form a conceptual framework for solving existing and emerging problems.
d.determine the need for FASB involvement in an emerging issue.

Which of the following is not a publication of the FASB?
1.
2.
3.
4.

a.Statements of Financial Accounting Concepts
b.Accounting Research Bulletins
c.Interpretations
d.Technical Bulletins

The American Institute of Certified Public Accountants (AICPA)
continues to be involved in all of the following except
1.
2.
3.
4.

a.developing and enforcing professional ethics.
b.developing auditing standards.
c.providing professional education programs.
d.all of the above.

Which of the following pronouncements were issued by the
Accounting Principles Board?

1.
2.
3.
4.

a.Accounting Research Bulletins
b. Opinions
c. Statements of Position
d. Statements of Financial Accounting Concepts

Financial accounting standard-setting in the United States
1.

a.can be described as a social process which reflects political actions of
various interested user groups as well as a product of research and logic.


2.
3.

b.is based solely on research and empirical findings.
c.is a legalistic process based on rules promulgated by governmental
agencies.
4. d.is democratic in the sense that a majority of accountants must agree with
a standard before it becomes enforceable.

Companies that are listed on a stock exchange are required to
submit their financial statements to the
1.
2.

3.
4.

a.AICPA.
b.APB
c.FASB.
d.SEC.

The purpose of the International Accounting Standards Board is
to
1.

a.issue enforceable standards which regulate the financial accounting and
reporting of multinational corporations.
2. b.develop a uniform currency in which the financial transactions of
companies through-out the world would be measured.
3. c.promote uniform accounting standards among countries of the world.
4. d.arbitrate accounting disputes between auditors and international
companies.

What is a possible danger if politics plays too big a role in
accounting standard setting?
1.
2.
3.
4.

a.Accounting standards that are not truly generally accepted.
b.Individuals may influence the standards.
c.User groups become active.

d.The FASB delegates its authority to elected officials.