Test bank for intermediate accounting volume 1 5th edition

Test Bank for Intermediate Accounting Volume 1 5th
Edition
Multiple Choice Questions
Private placements refer to:
1.

C. shares that form part of a control block.

2.

D. all of these answers are correct.

3.

B. debt or equity securities issued to individuals or organizations without being listed
with a securities commission.

4.

A. funds not disclosed by private companies.

What is the purpose of financial statements?
1.

A. to disclose the market value of the firm's assets and liabilities.

2.

C. to identify shareholders.

3.

B. to determine compliance with tax laws.

4.

D. to help users make decisions.

6) John is the vice president of marketing for a local tour guide company. He
is concerned that his customers are not recommending his company to
friends of theirs. For John, this problem is a:
1.

a. purchase issue.

2.

b. demographic problem.

3.

c. prepurchase issue.

4.

d. postpurchase issue.


29) Research has shown that Mexican firms are less likely to have formal
codes of ethics and more likely to bribe public officials than are American or
Canadian companies. This demonstrates that:

1.

a. business practices can be unethical without being illegal.

2.

b. social marketing is not important in Mexico.

3.

c. cultural values and beliefs are important for determining what is considered ethical.

4.

d. American and Canadian companies are more respectful than Mexican companies.

22) People who have grown up “wired” in a world of digital technology are
described as ________.
1.

a. horizontal revolutionaries

2.

b. smart socialites

3.

c. digital natives

4.

d. face-to-place consumers

16) Doritos have capitalized on _________ in their memorable Superbowl ads.
1.

a. spokescharacters

2.

b. social marketing

3.

c. green marketing

4.

d. consumer-generated content

Which of the following is published by the Financial Accounting Standards
Board?
1.

B. Accounting Exposure Drafts


2.

A. Accounting Project Proposals

3.

E. Statements of Auditing Revisions

4.

D. CICA Handbook Sections and Accounting Guidelines

5.

C. Accounting Issues Papers

33) Which Act is designed to protect consumers against purchasing food,
cosmetics, or drugs that are deceptive or misleading, or that may pose a risk
to health?
1.

a. Food and Drugs Act

2.

b. Consumer Packaging and Labelling Act

3.

c. Hazardous Products Act

4.

d. National Trademark and True Labelling Act

Generally accepted accounting principles currently are promulgated primarily
by the:
1.

D. Accounting Standards Board (AcSB)

2.

A. Canadian Academic Accounting Association (CAAA)

3.

B. Canada Customs and Revenue Agency

4.

C. Ontario Securities Commission (OSC)

Which of the following statement(s) is(are) correct?
1.

B. Companies that use the disclosed basis of accounting are NOT allowed to use
differential reporting,


2.

A. Companies that use the disclosed basis of accounting are in effect using differential
reporting,

3.

C. When used, the disclosed basis of accounting must comply with GAAP.

4.

D. both "companies that use the disclosed basis of accounting are NOT allowed to use
differential reporting" and "when used, the disclosed basis of accounting must comply
with GAAP" are correct.

Professional accountants need a wide range of knowledge and skills. Which
of the following is not an example of such knowledge or skills?
1.

A. an ability to calculate and analyze data, and a facility with numbers.

2.

C. an ability to communicate in a concise and understandable manner.

3.

B. knowledge of many disciplines such as finance, economics, management,
marketing and statistics.

4.

D. skills derived from prior management experience.

The body that has the responsibility to set generally accepted accounting
principles in Canada is the
1.

A. FASB

2.

D. OSC

3.

C. AcSB

4.

B. IASC


35) Jackson, the marketing manager for a large food manufacturing plant,
recently met with his boss because he was concerned that his company was
violating the Food and Drugs Act of 1953 and the Competition Act of 1986.
Based on this information, what was the problem that Jackson was concerned
about?
1.

a. The company had not taken any quality-control measures when producing its
products.

2.

b. The company was advertising one of its unhealthy products as being healthy.

3.

c. The company would not reveal what information it was collecting from its customers.

4.

d. Its products were unsafe to consume and could cause harm to people.

External decision-makers include all of the following except:
1.

C. creditors.

2.

B. owners.

3.

A. managers.

4.

D. financial press.

The conceptual framework of accounting should have many positive effects
as new accounting standards are developed. Which of the following is not one
of those effects?
1.

D. Management should have greater latitude in choosing among accounting
alternatives.

2.

A. Financial statements among companies and industries should be more consistent
and comparable.

3.

C. Users' understanding and confidence in financial statements should increase.


4.

B. Standard setting should be more consistent with an overall statement of the
objectives and concepts of financial reporting.

5.

E. Accountants should be better able to assess the validity of different accounting
alternatives for similar and dissimilar transactions and events.

27) Sara and Jessica text back and forth while Sara is shopping and Jessica is
riding the bus to work. This is an example of:

1.

a. a synchronous interaction.

2.

b. an asynchronous interaction.

3.

c. utilitarian consumption.

4.

d. a consumption community.

Which of the following statements regarding cash flows is not accurate?
1.

A. Before the present cash flow statement standard became effective, companies had
a choice of whether to report cash flow from operating activities or working capital from
operating activities.

2.

D. Information about past cash flows is useful in predicting an entity's future cash
flows.

3.

E. Information about the balances of current liabilities, long-term debt and stockholders'
equity can be found in the statement of cash flows.

4.

B. Studies have shown that a cash flows report is more relevant to investor decisions
than a working capital report.

5.

C. The reported cash flow from operating activities has been found useful in evaluating
a firm's ability to make interest payments and repay debt.


Generally accepted accounting principles are:
1.

A. optional procedures for recording economic events

2.

C. the rules of accounting, prescribed exclusively by Federal regulatory agencies

3.

D. standards of accounting, a material departure from which may result in a qualified
opinion issued by an auditor

4.

B. mandatory rules applied to both financial and management accounting

If cash flow prediction is a company's primary reporting objective, this would
likely result in:
1.

C. Poor matching

2.

D. Fewer accruals and deferrals

3.

A. Higher earnings

4.

B. Lower earnings

Generally accepted accounting principles
1.

A. include specific rules, practices and procedures.

2.

D. all of these answers are correct.

3.

C. standards of accounting, a material departure from which may result in a qualified
opinion issued by an auditor.

4.

B. include broad principles and conventions of general applications including
underlying concepts


Pronouncements of the Accounting Standards Board:
1.

C. are similar in force and effect to those of the Accounting and Auditing Research
Committee.

2.

A. are commonly known as "Accounting Research Studies."

3.

B. are enforced by the American Accounting Association.

4.

E. must be followed for income tax purposes.

5.

D. are commonly known as "Opinions."

The disclosed basis of accounting refers to
1.

D. the practice of disclosing all pertinent accounting policies in a company's annual
report.

2.

A. the use of non-GAAP policies by private companies.

3.

C. the use of International Financial Reporting Standards.

4.

B. the use of non-GAAP policies by any company.

Which of the following is NOT a primary motivator for maximizing net
income?
1.

C. To enhance managers' performance-based compensation.

2.

A. Compliance with debt covenants.

3.

D. To minimize the company's income tax liability.

4.

B. To positively influence users' assessment of management performance.

10) Which of the following is not an example of a demographic variable?
1.

a. age


2.

b. geography

3.

c. lifestyle

4.

d. ethnicity

23) The multi-player online game “World of Warcraft” is a good example of:
1.

a. consumer-generated content.

2.

b. the dark side of consumerism.

3.

c. a virtual brand community.

4.

d. anti-consumption

The users toward which financial statements are directed:
1.

A. are very sophisticated and experienced in using financial information.

2.

B. are independent Public Accountants.

3.

C. have degrees in accounting and finance.

4.

E. are Chartered Financial Analysts.

5.

D. have a reasonable understanding of business and economic activities.

The stewardship function refers to
1.

C. The collection of information for planning the future of the entity, implementing those
plans, and for controlling daily operations.

2.

D. The collection of information to help present and potential investors and creditors
and other users in assessing the amounts, timing and uncertainty of prospective cash
receipts.

3.

B. A company's corporate citizenship track record


4.

A. Disclosing management's use of funds and other financial information to absentee
shareholders

12) Marketers who interact with their customers on a regular basis, and not
just at the time of purchase, are most likely engaged in:
1.

a. brand loyalty

2.

b. psychographic segmentation

3.

c. market segmentation

4.

d. relationship marketing

15) The film The Wedding Crashers had what reported impact?
1.

a. It resulted in an decrease in wedding bookings.

2.

b. It led to a sell out DVD success.

3.

c. It caused an outbreak of uninvited wedding guests.

4.

d. It boosted the US economy by 15% in it’s year of release.

8) A fast-food chain describes its core customer as a single male under 30
years of age with a working class job, who reads little, likes loud music, and
hangs out with friends. This is an example of:
1.

a. subculture.

2.

b. marketing segmentation.

3.

c. demographics.

4.

d. typical male Canadian consumer of burgers.


11) Mary designed an unsuccessful advertising campaign for a medical
insurance company that was targeted at 18- to 34-year-old males. The
campaign only included one commercial, which featured a young man who
had become crippled in a skydiving accident. While planning the campaign,
Mary failed to recognize that:
1.

a. 18- to 34-year-old males are not interested in medical insurance.

2.

b. not all 18- to 34-year-old males share the same lifestyle.

3.

c. television commercials are not effective for advertising medical insurance.

4.

d. she should have also segmented based on ethnicity.

The primary responsibility of an independent auditor who is a professional
accountant is to:
1.

D. prepare current financial reports for the client.

2.

A. verify the accuracy of the amounts determined by the client.

3.

B. assess whether the management is honest.

4.

C. evaluate the "fair presentation" of the company's financial reports.

Choose the correct statement about audits of corporations:
1.

A. Outside auditors are paid by the government for auditing the financial statements of
corporations.

2.

C. Public corporations (those whose stock are traded on exchanges) are subject to
annual audit as to their compliance with GAAP.

3.

D. It is the employees of the firm being audited who perform the annual audit of the
financial statements of that firm.

4.

B. Revenue Canada performs audits of corporations' financial statements.


The essential characteristic(s) of accounting is (are)
1.

B. communication of financial information about economic entities.

2.

C. identification, measurement, and communication of financial information.

3.

A. communication of financial information to interested persons.

4.

D. all of these.

Users of financial statements can generally be broken down into which of the
following two categories:
1.

A. Internal and external users.

2.

D. External users and preparers.

3.

B. Government and investors.

4.

C. Creditors and Investors.

An organization that has not published financial accounting standards is the
1.

D. the Emerging Issues Committee

2.

B. the Certified Management Accountants of Canada.

3.

C. the International Accounting Standards Committee.

4.

A. the Institute of Chartered Accountants.

General-purpose financial statements report financial information relevant to:
1.

C. government users only.

2.

A. investors only.

3.

B. creditors only.


4.

D. investors, creditors and government users.

25) An e-tailer is:
1.

a. a market research company that primarily collects data online.

2.

b. an anti e-commerce advocate.

3.

c. an online retail supplier.

4.

d. an end-of-purchase

5.

feedback service.

19) One of the fundamental premises of the modern field of consumer
behaviour is that people often buy products not for what they do, but for what
they:
1.

a. cost.

2.

b. mean.

3.

c. look like.

4.

d. promise.

Which of the following areas within the accounting field has as its main
purpose serving the information needs of parties outside the reporting firm?
1.

A. Financial accounting.

2.

B. Tax accounting.

3.

D. Auditing.

4.

C. Managerial accounting.

21) Christina Chiang has decided to order a week's worth of groceries from
HomeGrocer.com. She places her order and is pleasantly surprised when she
receives her order at her doorstep six hours after the order was placed. This
transaction is an example of:
1.

a. social commerce.

2.

b. TCR.

3.

c. virtual consumption.

4.

d. U-commerce.

Which of the following financial statements are required for companies
adhering to IFRS but NOT ASPE (private entity GAAP)?
1.

A. Statement of Comprehensive income.

2.

B. Statement of Changes in Equity.

3.

D. Statement of Retained Earnings.

4.

E. Both A & B are correct.

5.

C. Statement of Cash Flows.

3) If a product succeeds in satisfying needs and is purchased over and over, it
most likely has attained:
1.

a. product separation.

2.

b. brand loyalty.

3.

c. lifestyle variation.

4.

d. purchase conception.

Lenders and creditors are most concerned with a company's
1.

C. solvency.

2.

B. adherence to covenants.

3.

D. cash flows.

4.

A. profitability.

Which of the following are major factors in the rapidly changing financial
reporting environment in Canada?
1.

C. the growing number of institutional investors and the knowledge based economy.

2.

D. none of these answers is correct.

3.

B. globalization and the use of computer networks.

4.

A. increased demand for accountants and the impact of technology.

20) If you listed your collection of NHL rookie cards on eBay, you would be
engaging in which type of commerce?
1.

a. transactional

2.

b. psychographic

3.

c. B2C

4.

d. C2C

Secondary sources of GAAP should be evaluated on
1.

E. none of these answers is correct.

2.

A. acceptance of the source by industry professionals.

3.

B. the specificity of the source.

4.

D. both the specificity of the source & the continued relevance of the source.

5.

C. the continued relevance of the source.

24) Groups of people that unite on the Internet to share a passion for a
product are known as:
1.

a. chat rooms.

2.

b. virtual brand communities.

3.

c. consumer networks.

4.

d. product organizations.

28) Global terms like kuroi kiri, la mordida, bustarella, and baksheesh are
referring to:
1.

a. competition.

2.

b. segmentation.

3.

c. theft.

4.

d. bribery.

31) Although research has shown that consumers think better of products
made by firms they feel are behaving ethically, many "ethical" companies
encounter difficulties selling their products. What is a good a reason for this?
1.

a. Ethical companies do not make good quality products.

2.

b. Products made by ethical companies are hard to find for consumers.

3.

c. Sometimes consumers' buying behaviour is not consistent with their positive
attitudes about ethical products.

4.

d. Consumers lie on surveys about ethical companies in order to appear like they care.

5) Tina, a supervisor of displays for Sears Canada, knows that attractive
displays can generate additional sales of particular items. From a marketer's
perspective, this is a/an:
1.

a. purchase issue

2.

b. postpurchase issue

3.

c. merchandising complexity

4.

d. loss leader

The role of the Accounting Standards Board (ACSB) in the formulation of
accounting principles in Canada can be best described as
1.

A. primary

2.

B. secondary

3.

C. sometimes primary and sometimes secondary

4.

D. non-existent

The organization created to develop accounting standards in Canada, the
ACSB, is concerned about:
1.

B. reported earnings.

2.

C. reported comparability of results.

3.

D. reporting abuse.

4.

E. all of these answers are correct.

5.

A. reported cash flows.

9) In studying consumer behaviour, it is often useful to categorize people on
the basis of some similarity. Descriptions such as age, gender, income, or
occupation are called:
1.

a. demographics.

2.

b. psychographics.

3.

c. personal profiles.

4.

d. physiology.

17) Saucony Canada held a contest asking consumers to send in their own
photos, which will be utilized in a future advertising campaign for the
company. This is an example of:
1.

a. anticonsumption.

2.

b. consumer-generated content

3.

c. social marketing.

4.

d. green marketing.

18) Billy is an avid collector of shoes. He constantly voices his opinion on
blogs and product review websites of what features new shoes should have.
His behaviour is consistent with the concept of:
1.

a. file sharing.

2.

b. database marketing.


3.

c. interpretivism.

4.

d. consumer-generated content.

14) Tony Roma’s restaurant sends regular customers a coupon for a free meal
on their birthdays. This is an example of:
1.

a. a company seeking to attract lost clients back to base.

2.

b. a social networking process.

3.

c. a loss-leading promotion campaign.

4.

d. relationship marketing.

26) The Open Data Partnership is:

1.

a. a low privacy date-matching service.

2.

b. a free-serve information access network.

3.

c. a system allowing consumers to edit information collected about them.

4.

d. a controlled group of corporations dedicated to information sharing.

The stewardship function is reflected by:
1.

A. Minimizing interperiod allocations

2.

C. Full disclosure

3.

D. Both (A) and (B) are correct.

4.

E. Both (A) and (C) are correct.

5.

B. Performance evaluation


13) Recently marketers have come to realize the value of what is being called
relationship marketing. In marketing terms, it means:
1.

a. developing friendships with foreign governments so that American products can be
sold in their countries at a fair price.

2.

b. instituting practices which show companies' awareness of their responsibilities to the
environment and society.

3.

c. building bonds between brands and customers that will last over time.

4.

d. using new electronic capabilities to ensure that all channel members work smoothly
together, for example, in seeing that products get to retailers before their inventories run
out.

32) In a survey designed to measure people's willingness to pay for fair trade
coffee, researchers found that most coffee drinkers were willing to pay an
average price premium of ________.
1.

a. 10 percent

2.

b. 20 percent

3.

c. 30 percent

4.

d. 40 percent

Which of the following is NOT a primary source of GAAP?
1.

D. Abstracts of Issues discussed by the EIC (Emerging Issues Committee).

2.

C. Accounting Guidelines issued by the AcSB.

3.

A. Accounting sections of the CICA Handbook.

4.

B. FASB accounting standards.


Which of the following statements is correct?
1.

D. Neither primary nor secondary sources of GAAP have established hierarchies.

2.

C. Both primary and secondary sources of GAAP have established hierarchies.

3.

B. There is no hierarchy with respect to secondary sources of GAAP.

4.

A. There is no hierarchy with respect to primary sources of GAAP.

34) Of the following pieces of legislation intended to protect the consumer,
which was passed first?
1.

a. Textile Labelling Act

2.

b. Food and Drug Act

3.

c. Motor Vehicle Safety Act

4.

d. Hazardous Products Act

5.

e. National Trademark and True Labelling Act

During the coming years, we should expect the ACSB to
1.

C. continue to provide accounting standards for private companies.

2.

D. all of these.

3.

B. harmonize Canadian GAAP to international standards.

4.

A. extend differential reporting options available to private companies.

7) The expanded view of the exchange that includes the issues that influence
the consumer before, during, and after a purchase is called:
1.

a. the value.


2.

b. the strategic focus.

3.

c. the pre-sell strategy.

4.

d. the consumption process.

4) The study of the processes involved when individuals or groups select,
purchase, use, or dispose of products, services, ideas, or experiences to
satisfy needs and desires is called:
1.

a. market segmentation,

2.

b. relationship marketing.

3.

c. market research.

4.

d. consumer behaviour

30) The fact that bribery in business is acceptable in some countries but not
in others demonstrates that:
1.

a. ethics are relative to the situation in which business persons find themselves.

2.

b. cultural jamming has been successfully practiced in some countries.

3.

c. ethics are incompatible with social marketing.

4.

d. practices can be unethical without being illegal.

True-False Questions

Both private and publicly accountable companies must comply with IFRS
beginning on January 1, 2011.
1.

True

2.

False


A company's functional currency is the currency in which it conducts most of
its business.
1.

True

2.

False

A company's presentation currency should normally be its functional
currency.
1.

True

2.

False

The main purpose of financial accounting is to communicate useful financial
information to decision-makers both inside and outside of the business
organization.
1.

True

2.

False

Disclosure notes facilitate the evaluation of enterprise position and
performance because they include information, which helps to explain
qualitaitve aspects of earnings.
1.

True

2.

False

The Canadian Institute of Chartered Accountants (CICA) initially created the
Accounting and Auditing Research Committee, which was replaced by the
Accounting Research Committee (ARC), which in turn was replaced by the
Accounting Standards Board (AcSB).
1.

True

2.

False

Maximization of net income is a common motivation of managers.
1.

True

2.

False

The various provincial securities commissions do not exert influence on the
development of accounting standards.
1.

True

2.

False

The disclosed basis of accounting (DBA) refers to the use of Non-GAAP
accounting policies by private companies.
1.

True

2.

False

Canadian companies must always present their financial results in Canadian
dollars.
1.

True

2.

False

A company whose net income is highly correlated to its operating cash flows
is said to have a high quality of earnings.
1.

True

2.

False


The CICA Handbook requires that income for tax purposes be equal to a
company's accounting income at all times.
1.

True

2.

False

External users of a company's financial statements may have conflicting
objectives.
1.

True

2.

False

The Accounting Standards Board (ACSB) is an independent group
established to promulgate accounting standards for governmental units such
as provincial and civic entities.
1.

True

2.

False

Developments in accounting standards have not addressed the problem of
using accounting techniques to smooth earnings.
1.

True

2.

False

The influence of tax rules when selecting appropriate accounting treatment
for a transaction is particularly strong with public companies.
1.

True

2.

False