Test bank for intermediate accounting 17th edition by stice

Test Bank for Intermediate Accounting 17th Edition by
Stice

The overall objective of financial reporting is to provide
information

1. that is useful for decision making.
2. about an enterprise's assets, liabilities, and owners' equity.
3. about an enterprise's financial performance during a period.
4. that allows owners to assess management's performance.


Which of the following is not normally an objective of financial
reporting?

1. To provide information about an entity's assets and claims against

those assets

2. To provide information that is useful in assessing an entity's sources

and uses of cash

3. To provide information that is useful in lending and investing decisions
4. To provide information about an entity's liquidation value

Financial accounting is the area of accounting that emphasizes
reporting to

1. management.
2. regulatory bodies.

3. internal auditors.
4. creditors and investors.

Management accounting is the area of accounting that emphasizes

1. reporting financial information to external users.
2. reporting to the SEC.
3. combining accounting knowledge with an expertise in data processing.
4. developing accounting information for use within a company.


The responsibility to review the work of the accountants and issue
opinions as to the fairness of the financial statements rests with

1. the external auditor.
2. the board of directors.
3. the internal auditors.
4. management.

As independent (or external) auditors, CPAs are primarily responsible
for

1. preparing financial statements in conformity with GAAP.
2. certifying the accuracy of financial statements.
3. expressing an opinion as to the fairness of financial statements.
4. filing financial statements with the SEC.

Which of the following is an internal user of a company's financial
information?

1. Board of directors
2. Stockholders in the company
3. Holders of the company's bonds
4. Creditors with long-term contracts with the company


Prior to 1973, generally accepted accounting principles were
established

1. by the Financial Accounting Foundation.
2. by the Securities and Exchange Commission.
3. under the direction of the American Institute of Certified Public

Accountants.

4. by the individual states.

Members of the Financial Accounting Standards Board are appointed
by the

1. American Accounting Association.
2. Financial Accounting Foundation.
3. Securities and Exchange Commission.
4. American Institute of Certified Public Accountants.

The Financial Accounting Foundation oversees the

1. operations of the AICPA.
2. operations of the FASB.
3. AAA.

4. financial reporting arm of the SEC.


A major difference between the Financial Accounting Standards Board
(FASB) and its predecessor, the Accounting Principles Board (APB),
is

1. all members of the FASB serve full time, are paid a salary, and are

independent of any public or private enterprises.

2. over 50 percent of the members of the FASB are required to be

Certified Public Accountants.

3. the FASB issues exposure drafts of proposed standards.
4. all members of the FASB possess experience in both public and

corporate accounting.

Which of the following is a characteristic of the Financial Accounting
Standards Board?

1. The FASB is composed of five members.
2. FASB members must come from CPA firms.
3. FASB members are part-time.
4. FASB members may retain their positions with previous employers.

Documents issued by the FASB include all of the following except

1. Statements of Financial Accounting Standards.
2. Interpretations of Statements of Financial Accounting Standards.
3. Statements of Financial Accounting Concepts.
4. Financial Reporting Releases.


Primary responsibility for GAAP and public reporting currently rests
with the

1. SEC.
2. FASB.
3. Congress.
4. AICPA.

The responsibility of the Emerging Issues Task Force (EITF) is to

1. issue statements which reflect a consensus of the EITF on how to

account for new financial reporting issues where guidance is needed
quickly.

2. do research on financial reporting issues that are being addressed by

the AICPA.

3. respond to groups lobbying the FASB on issues that affect a particular

industry.

4. develop concept statements the AICPA can use as a frame of reference

to solve future problems.

The normal order followed by the FASB in publishing its standards
is

1. statement, discussion memorandum, opinion.
2. discussion memorandum, interpretation, exposure draft, statement.
3. exposure draft, discussion memorandum, statement.
4. discussion memorandum, exposure draft, statement.


Proper application of accounting principles is most dependent upon
the

1. existence of specific guidelines.
2. oversight of regulatory bodies.
3. external audit function.
4. professional judgment of the accountant.

The Governmental Accounting Standards Board

1. was incorporated into the Financial Accounting Standards Board when

the FASB was created.

2. addresses financial reporting issues of U.S. government treaties and

treasury rulings.

3. addresses the financial reporting issues related to state and local

governments.

4. addresses the governmental reporting activities of the SEC.

The primary current source of generally accepted accounting principles
for governmental operations is the

1. Financial Accounting Standards Board.
2. Securities and Exchange Commission.
3. Governmental Accounting Standards Board.
4. Government Accounting Office.


The process of establishing financial accounting standards is

1. a democratic process in that a majority of practicing accountants must

agree with a standard before it becomes implemented.

2. a legislative process based on rules promulgated by government

agencies.

3. based solely on economic analysis of the effects each standard will

have if it is implemented.

4. a social process which incorporates political actions of various

interested user groups as well as professional research and logic.

Congress

1. has legally barred the SEC from interfering with the work of the FASB.
2. is restricted from holding hearings concerning the accounting

profession.

3. gave the SEC the power to establish accounting principles for

corporations whose stock is sold and traded to the general public.

4. appoints two of the five members of the FASB.

Once the FASB has established an accounting standard, the

1. standard is continually reviewed to see if modification is necessary.
2. standard is not reviewed unless the SEC makes a complaint.
3. task of reviewing the standard to see if modification is necessary is

given to the AICPA.

4. principle of consistency requires that no revisions ever be made to the

standard.


Primary responsibility for the preparation of financial statements in

accordance with generally accepted accounting principles rests
with

1. the internal auditors.
2. management.
3. the external auditors.
4. the board of directors.

Which is the correct historical sequence of accounting rule-making
bodies?

1. CAP, FASB, APB
2. CAP, APB, FASB
3. FASB, APB, CAP
4. APB, CAP, FASB

The primary current source of generally accepted accounting principles
for nongovernmental operations is the

1. American Institute of Certified Public Accountants.
2. Securities and Exchange Commission.
3. Financial Accounting Standards Board.
4. Governmental Accounting Standards Board.


How many board members serve on the FASB?

1. 5
2. 7
3. 14

4. 20

When the FASB deliberates about an accounting standard, firms whose
financial statements would be affected by that standard

1. are legally barred from lobbying the FASB.
2. are not allowed to lobby the FASB if the standard would have a

negative impact on their financial statements.

3. are not allowed to lobby the FASB if the standard would have a positive

impact on their financial statements.

4. are free to lobby for or against the standard.

Pronouncements issued by the SEC include

1. Accounting Research Bulletins.
2. Statements on Accounting Principles.
3. Financial Accounting Standards.
4. Financial Reporting Releases.

The primary purpose of the Securities and Exchange Commission is
to

1. regulate the issuance and trading of securities.


2. issue accounting and auditing regulations for publicly held companies.

3. prevent the trading of speculative securities.
4. enforce generally accepted accounting principles.

Form 10-K is submitted to the

1. FASB.
2. GASB.
3. IRS.
4. SEC.

The Journal of Accountancy is published by the

1. American Accounting Association.
2. American Institute of Certified Public Accountants.
3. Financial Executives Institute.
4. Financial Accounting Standards Board.

The International Accounting Standards Board was formed to

1. enforce FASB standards in foreign countries.
2. develop worldwide accounting standards.
3. establish accounting standards for U.S. multinational companies.
4. develop accounting standards for countries that do not have their own

standard-setting bodies.


Which of the following items is not a modifying convention?

1. Matching

2. Materiality
3. Industry practices
4. Conservatism

Generally accepted accounting principles

1. are accounting adaptations based on the laws of economic science.
2. derive their credibility and authority from legal rulings and court

precedents.

3. derive their credibility and authority from the federal government

through the financial reporting section of the SEC.

4. derive their credibility and authority from general recognition and

acceptance by the accounting profession.

A conceptual framework of accounting should

1. lead to uniformity of financial statements among companies within the

same industry.

2. eliminate alternative accounting principles and methods.
3. guide the AICPA in developing generally accepted auditing standards.
4. define the basic objectives, terms, and concepts of accounting.

Accountants prepare financial statements at arbitrary points in time
during a company's lifetime in accordance with the accounting concept
of

1. matching.
2. comparability.
3. accounting periods.
4. materiality.

The assumed continuation of a business entity in the absence of
evidence to the contrary is an example of the accounting concept
of

1. accrual.
2. consistency.
3. comparability.
4. going concern.

Important constraints underlying the qualitative characteristics of
accounting information are

1. historical cost and going concern.
2. materiality, conservatism, and cost-effectiveness.
3. consistency, comparability, and conservatism.
4. verifiability, neutrality, and representational faithfulness.


When a large number of individuals, using the same measurement
method, demonstrate that a high degree of consensus can be secured
among independent measurers, then the result exhibits the

characteristic of

1. verifiability.
2. neutrality.
3. relevance.
4. reliability.

Which of the following measurement attributes is not currently used in
practice?

1. Present value
2. Net realizable value
3. Current replacement cost
4. Inflation-adjusted cost

Financial information exhibits the characteristic of consistency
when

1. accounting procedures are adopted which smooth net income and

make results consistent between years.

2. extraordinary gains and losses are shown separately on the income

statement.

3. accounting entities give similar events the same accounting treatment

each period.

4. expenditures are reported as expenses and netted against revenue in

the period in which they are paid.


Historical cost has been the valuation basis most commonly used in
accounting because of its

1. timelessness.
2. conservatism.
3. reliability.
4. accuracy.

When financial reports from two different companies have been
prepared and presented in a similar manner, the information exhibits
the characteristic of

1. relevance.
2. reliability.
3. comparability.
4. consistency.

Accounting for inventories by applying the lower-of-cost-or-market is
an example of the application of

1. conservatism.
2. comparability.
3. consistency.
4. materiality.

The secondary qualitative characteristics of accounting information
are

1. relevance and reliability.
2. comparability and consistency.
3. understandability and decision usefulness.
4. materiality and conservatism.

Which of the following elements of financial statements is not a
component of comprehensive income?

1. Revenues
2. Expenses
3. Losses
4. Distributions to owners

An item would be considered material and therefore would be
disclosed in the financial statements if the

1. expected benefits of disclosure exceed the additional costs.
2. impact on earnings is greater than 3 percent.
3. FASB definition of materiality is met.
4. omission of misstatement of the amount would make a difference to

the users.


What accounting concept justifies the use of accruals and
deferrals?

1. Going-concern assumption
2. Corporate form of organization
3. Consistency characteristic
4. Arm's-length transactions

Which of the following is not a purpose of the conceptual framework of
accounting?

1. To provide definitions of key terms and fundamental concepts
2. To provide specific guidelines for resolving situations not covered by

existing accounting standards

3. To assist accountants and others in selecting among alternative

accounting and reporting methods

4. To assist the FASB in the standard-setting process

Which of the following is not an implication of the going-concern
assumption?

1. The historical cost principle is credible.
2. Depreciation and amortization policies are justifiable and appropriate.
3. The current/noncurrent classification of assets and liabilities is

justifiable and significant.

4. Amortizing research and development costs over multiple periods is

justifiable and appropriate.


The overriding qualitative characteristic of accounting information
is

1. relevance.
2. understandability.
3. reliability.
4. decision usefulness.

Which of the following statements concerning the objectives of
financial reporting is correct?

1. The objectives are intended to be specific in nature.
2. The objectives are directed primarily toward the needs of internal users

of accounting information.

3. The objectives were the end result of the FASB's conceptual framework

project.

4. The objectives encompass not only financial statement disclosures, but

other information as well.

Recording the purchase price of a pencil sharpener (with an estimated
useful life of 10 years) as an expense of the current period is justified

by the

1. going-concern assumption.
2. materiality constraint.
3. matching principle.
4. comparability principle.


Which of the following is not one of the fundamental criteria for
recognition?

1. Timeliness
2. Measurability
3. Relevance
4. Reliability

According to the FASB's conceptual framework, the process of
reporting an item in the financial statements of an entity is

1. realization.
2. recognition.
3. matching.
4. allocation.

Conservatism is best described as selecting an accounting alternative
that

1. understates assets and/or net income.
2. has the least favorable impact on owners' equity.
3. overstates, as opposed to understates, liabilities.

4. is least likely to mislead users of financial information.


The financial statements that are prepared for the business are
separate and distinct from the owners according to the

1. going-concern assumption.
2. matching principle.
3. economic entity assumption.
4. full disclosure principle.

According to Statement of Financial Accounting Concepts No. 2,
neutrality is an ingredient of Relevance Reliability

1. Yes Yes
2. Yes No
3. No No
4. No Yes

Under Statement of Financial Accounting Concepts No. 2,
representational faithfulness is an ingredient of Relevance
Reliability

1. Yes Yes
2. Yes No
3. No No
4. No Yes


According to the FASB's conceptual framework, predictive and

feedback values are ingredients of Relevance Reliability

1. Yes No
2. Yes Yes
3. No Yes
4. No No

According to the FASB's conceptual framework, which of the following
relates to both relevance and reliability? Consistency Verifiability

1. Yes Yes
2. Yes No
3. No Yes
4. No No

The accrual basis of accounting is based primarily on

1. conservatism and revenue realization.
2. conservatism and matching.
3. consistency and matching.
4. revenue realization and matching.

The branch of accounting that is concerned primarily with providing
information for internal users is called

1. auditing.


2. managerial accounting.
3. financial accounting.

4. income tax accounting.

The singularly unique function performed by certified public
accountants in United States is

1. tax preparation.
2. management advisory services.
3. the attest function.
4. the preparation of financial statements.

The branch of accounting that is concerned with providing information
to present and potential creditors of an enterprise is

1. auditing.
2. managerial accounting.
3. financial accounting.
4. income tax accounting.

Which of the following is true about international accounting
standards?

1. Significant differences exist between U.S. GAAP and GAAP of other

countries.

2. Few differences exist between U.S. GAAP and GAAP of other countries.
3. The IASB is the standards-setting body of France.


4. It is unlikely that the differences between U.S. GAAP and GAAP of other

countries will diminish over time.

The United States Securities and Exchange Commission

1. has recognized IASB standards as an acceptable alternative to U.S.

GAAP.

2. requires foreign companies listing their shares on U.S. stock exchanges

to restate their financial statements to U.S. GAAP.

3. has barred foreign companies from listing their shares on U.S. stock

exchanges.

4. has no jurisdiction in the United States over foreign companies listing

their shares on U.S. stock exchanges.

For which of the following reporting issues has the FASB adopted
substantially the same approach as the IASB?

1. Segment reporting
2. Earnings per share
3. Statement of cash flows
4. Pension plans

The journal Accounting Horizons is published by which of the following

organizations?

1. American Institute of Certified Public Accountants (AICPA)
2. American Accounting Association (AAA)
3. Securities and Exchange Commission (SEC)
4. Financial Accounting Standards Board (FASB)


Financial statements issued for the use of parties external to the
enterprise are the primary responsibility of the

1. management of the enterprise.
2. stockholders of the enterprise.
3. independent auditors of the enterprise.
4. creditors of the enterprise.

Which of the following is true?

1. Form 10-K is required under the FASB Conceptual Framework.
2. Form 10-Q is a quarterly report of significant events required by the

SEC.

3. Form 8-K is a quarterly report of significant events required by the SEC.
4. Form 8-K is the annual report submitted by small businesses to the

SEC.

Which of the following is not included in the highest authoritative level
of GAAP?

1. FASB Statements
2. AICPA Statements of Position
3. FASB Staff Positions
4. Accounting Principles Board (APB) Opinions

Disclosure requirements for financial reporting are strictest in

1. the United Kingdom.


2. Germany.
3. the United States.
4. France.

Which of the following qualitative characteristics of financial
information requires that information not be biased in favor of one
group of users to the detriment of others?

1. Relevance
2. Reliability
3. Verifiability
4. Neutrality

The primary measurement basis currently used to value assets in
external financial statements of an enterprise is the

1. current market price if the assets currently held by an enterprise were

sold on the open market.

2. current market price if the assets held by an enterprise were

purchased on the open market.

3. present value of the cash flows the assets are expected to generate

over their remaining useful lives.

4. market price of the assets held by an enterprise at the date the assets

were acquired (although some assets may be valued at their current
selling price or net realizable value).