Question 1

If a company has declared bankruptcy, its financial statements likely violate:

Accepted Answer

A)   The fair value measurement approach.
B)   The present value measurement approach.
C)   The stable monetary unit assumption.
D)   The going concern assumption.E) A) and B)
F) All of the above

Question 2

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

Accepted Answer

A)   Corporate executive accountability.
B)   Auditor rotation.
C)   Retention of work papers.
D)   All of these answer choices are correct.E) A) and B)
F) B) and D)

Question 3

Accounting standard-setting has been characterized as:

Accepted Answer

A)   A political process.
B)   Using the scientific method.
C)   Pure deductive reasoning.
D)   Pure inductive reasoning.E) A) and B)
F) A) and C)

Question 4

The FASB's conceptual framework's qualitative characteristics of accounting information include:

Accepted Answer

A)   Historical cost.
B)   Realization.
C)   Faithful representation.
D)   Full disclosure.E) A) and D)
F) A) and B) C

Question 5

Materiality can be affected by the dollar amount of an item, the nature of the item, or both.

Accepted Answer

A) True 
 B)False

Question 6

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Completeness

Accepted Answer

A)  The change in equity from nonowner transactions.
B)  Contains all information necessary for faithful representation.
C)  Along with relevance, a fundamental decision-specific quality.
D)  Results if an asset is sold for more than book value.
E)  Concerns the decision-making impact of both the amount and nature of an item.F) B) and C)
G) A) and C)

Question 7

An important argument in support of historical cost information is:

Accepted Answer

A)   Relevance.
B)   Predictive quality for future cash flows.
C)   Materiality.
D)   Verifiability.E) C) and D)
F) None of the above D

Question 8

The periodicity assumption requires that present value calculations take into account the number of compounding periods in each year.

Accepted Answer

A) True 
 B)False

Question 9

Comprehensive income is another term for net income.

Accepted Answer

A) True 
 B)False

Question 10

List the four financial statements most frequently provided to external users.

Accepted Answer

Balance sheet, Incom...

Question 11

The FASB is currently the public-sector organization responsible for setting accounting standards in the United States.

Accepted Answer

A) True 
 B)False

Question 12

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Periodicity assumption

Accepted Answer

A)  Implies consensus among different observers.
B)  Assumes an entity will continue to operate indefinitely.
C)  Ignores the possibility of inflation.
D)  Assumes all transactions can be identified with a particular entity.
E)  Requires reporting the financial life of an entity in discrete time frames.F) D) and E)
G) C) and E)

Question 13

-Compute Amazon's balance in cash at the beginning of the year.

Accepted Answer

Beginning balance in Cash + Ne...

Question 14

List and briefly describe the three levels of inputs described in the fair-value measurement hierarchy.

Accepted Answer

a. Quoted market prices in active market...

Question 15

Identify or define the following term: historical cost.

Accepted Answer

Historical cost-A measu...

Question 16

Disclosure notes to a company's financial statements:

Accepted Answer

A)   Are relatively unimportant facts that don't belong in the basic financial statements.
B)   Document the source of financial statement facts, like literary footnotes.
C)   Are an integral part of a company's financial statements.
D)   Are irrelevant facts that are immaterial in amount.E) C) and D)
F) B) and D)

Question 17

SFAC No.5 focuses on:

Accepted Answer

A)   Objectives of financial reporting.
B)   Qualitative characteristics of accounting information.
C)   Recognition and measurement concepts in accounting.
D)   Elements of financial statements.E) None of the above
F) A) and C)

Question 18

Over time, accounting standards have developed to reflect changes in the business world as well as changes in our ability to account for such changes. Using the example of marking assets and liabilities to their fair value, explain why you would expect accounting standards to change.

Accepted Answer

Historically, financial accounting relie...

Question 19

The FASB's framework for measuring fair value doesn't change the situations in which fair value is used under current GAAP.

Accepted Answer

A) True 
 B)False  True

Question 20

Net income equals:

Accepted Answer

A)   Assets minus liabilities.
B)   Revenues minus cost of goods sold.
C)   Revenues minus expenses.
D)   Cash receipts minus cash payments.E) A) and D)
F) A) and C)

Exam 1: Environment and Theoretical Structure of Financial Accounting

If a company has declared bankruptcy, its financial statements likely violate:

Correct AnswerverifiedShow Answer

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

Correct AnswerverifiedShow Answer

Accounting standard-setting has been characterized as:

Correct AnswerverifiedShow Answer

The FASB's conceptual framework's qualitative characteristics of accounting information include:

Correct AnswerverifiedC

Materiality can be affected by the dollar amount of an item, the nature of the item, or both.

Correct AnswerverifiedShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Completeness

Correct AnswerverifiedShow Answer

An important argument in support of historical cost information is:

Correct AnswerverifiedD

The periodicity assumption requires that present value calculations take into account the number of compounding periods in each year.

Correct AnswerverifiedShow Answer

Comprehensive income is another term for net income.

Correct AnswerverifiedShow Answer

List the four financial statements most frequently provided to external users.

Correct AnswerverifiedBalance sheet, Incom...View AnswerShow Answer

The FASB is currently the public-sector organization responsible for setting accounting standards in the United States.

Correct AnswerverifiedShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Periodicity assumption

Correct AnswerverifiedShow Answer

-Compute Amazon's balance in cash at the beginning of the year.

Correct AnswerverifiedBeginning balance in Cash + Ne...View AnswerShow Answer

List and briefly describe the three levels of inputs described in the fair-value measurement hierarchy.

Correct Answerverifieda. Quoted market prices in active market...View AnswerShow Answer

Identify or define the following term: historical cost.

Correct AnswerverifiedHistorical cost-A measu...View AnswerShow Answer

Disclosure notes to a company's financial statements:

Correct AnswerverifiedShow Answer

SFAC No.5 focuses on:

Correct AnswerverifiedShow Answer

Over time, accounting standards have developed to reflect changes in the business world as well as changes in our ability to account for such changes. Using the example of marking assets and liabilities to their fair value, explain why you would expect accounting standards to change.

Correct AnswerverifiedHistorically, financial accounting relie...View AnswerShow Answer

The FASB's framework for measuring fair value doesn't change the situations in which fair value is used under current GAAP.

Correct AnswerverifiedTrue

Net income equals:

Correct AnswerverifiedShow Answer

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C

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D

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Balance sheet, Incom...
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Beginning balance in Cash + Ne...
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a. Quoted market prices in active market...
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Historical cost-A measu...
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Historically, financial accounting relie...
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True

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