Question 1

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.
-Historical cost

Accepted Answer

A)  Basis of measurement for fixed assets.
B)  Reporting of all information that could affect decisions.
C)  Occurs when goods or services are transferred to the customer.
D)  Discounts future cash flows.
E)  Application of GAAP sometimes avoided under this constraint.F) A) and E)
G) A) and C)

Question 2

Under federal securities laws, the SEC has the authority to set accounting standards in the United States.

Accepted Answer

A) True 
 B)False

Question 3

Fundamental qualitative characteristics of accounting information are:

Accepted Answer

A)   Relevance and comparability.
B)   Comparability and consistency.
C)   Faithful representation and relevance.
D)   Neutrality and consistency.E) B) and C)
F) A) and D)

Question 4

Which of the following Statements of Financial Accounting Concepts defines the 10 elements of financial statements?

Accepted Answer

A)   SFAC 4.
B)   SFAC 3.
C)   SFAC 5.
D)   SFAC 6.E) A) and C)
F) A) and B)

Question 5

Change in equity from nonowner sources is:

Accepted Answer

A)   Comprehensive income.
B)   Revenues.
C)   Expenses.
D)   Gains and losses.E) A) and B)
F) All of the above

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.
-Expenses

Accepted Answer

A)  Net assets.
B)  Transfers of resources in exchange for common and preferred stock.
C)  Claims of creditors against the assets of a business.
D)  Outflows of resources to generate revenues.
E)  Cash dividends.F) C) and D)
G) A) and E)

Question 7

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.
-Economic entity 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) A) and D)
G) A) and C)

Question 8

Revenues are inflows or other enhancements of assets or settlements of liabilities from activities that constitute the entity's ongoing operations.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) ? The Act:

Accepted Answer

A)   Changed the entity responsible for setting auditing standards.
B)   Increased corporate executive responsibility for financial statements.
C)   Limited nonaudit services that can be performed by auditors for audit clients.
D)   Changed the entity responsible for setting accounting standards.E) A) and B)
F) A) and C)

Question 10

The FASB's conceptual framework lists relevance and timeliness as the two fundamental qualitative characteristics of decision-useful information.

Accepted Answer

A) True 
 B)False

Question 11

A rules-based approach to standard-setting stresses professional judgment as opposed to following a list of rules.

Accepted Answer

A) True 
 B)False

Question 12

Briefly describe how materiality is featured in the conceptual framework.

Accepted Answer

Materiality-Information is materi...

Question 13

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.
-Cost-effectiveness

Accepted Answer

A)  The decision to include an amount in the financial statements.
B)  Accounting information should be unbiased.
C)  Considers the value of using information relative to cost of providing it.
D)  Important in analysis between firms.
E)  Applying the same accounting practices over time.F) B) and D)
G) A) and B)

Question 14

Which of the following is not a concern expressed by the SEC regarding IFRS adoption by the U.S.?

Accepted Answer

A)   Need for the U.S. to have strong influence on the standard-setting process and ensure that standards meet U.S. needs.
B)   The language barriers associated with cooperation among many countries in developing IFRS.
C)   The high costs to companies of converting to IFRS.
D)   The fact that many laws, regulations and private contracts reference U.S. GAAP.E) All of the above
F) A) and D)

Question 15

The International Accounting Standards Board:

Accepted Answer

A)   Was the predecessor to the IASC.
B)   Can overrule the FASB when their policies disagree.
C)   Promotes the use of high-quality, understandable global accounting standards.
D)   Has its headquarters in Geneva.E) None of the above
F) C) and D)

Question 16

The purpose of the conceptual framework is to provide a structure and framework for a consistent set of GAAP.

Accepted Answer

A) True 
 B)False

Question 17

The primary responsibility for properly applying GAAP when communicating with investors and creditors through financial statements lies with a firm's auditors.

Accepted Answer

A) True 
 B)False

Question 18

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.
-Recognition

Accepted Answer

A)  The decision to include an amount in the financial statements.
B)  Accounting information should be unbiased.
C)  Considers the value of using information relative to cost of providing it.
D)  Important in analysis between firms.
E)  Applying the same accounting practices over time.F) B) and E)
G) A) and D)

Question 19

Under IFRS, the conceptual framework:

Accepted Answer

A)   Emphasizes the overarching concept of the financial statements providing a "true and fair representation" of the company.
B)   Is not designed to provide guidance to standard setters, but rather only to practitioners.
C)   Is not designed to provide guidance to practitioners, but rather only to standard setters.
D)   Specifies a set of rules that determine what constitutes a true IFRS standard.E) A) and D)
F) None of the above

Question 20

Listed below are ten organizations followed by a list of phrases that describe or characterize the organizations. Match each phrase with the correct organization.
-EITF

Accepted Answer

A)  FASB's predecessor.
B)  Primary national organization of accountants working in industry.
C)  Regulates the financial reporting for public companies.
D)  The FASB's parent organization.
E)  National organization of certified public accountants.F) Sets accounting standards in the United States.G) Provides timely responses to financial reporting issues.H) Advises the FASBI) Sets global accounting standards.J) Establishes auditing standards in the US for public companies.K) A) and D)
L) C) and H)

Exam 1: Environment and Theoretical Structure of Financial Accounting

Under IFRS, the conceptual framework:

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Change in equity from nonowner sources is:

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Which of the following Statements of Financial Accounting Concepts defines the 10 elements of financial statements?

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Under federal securities laws, the SEC has the authority to set accounting standards in the United States.

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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. -Historical cost

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Briefly describe how materiality is featured in the conceptual framework.

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The International Accounting Standards Board:

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Revenues are inflows or other enhancements of assets or settlements of liabilities from activities that constitute the entity's ongoing operations.

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Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) ? The Act:

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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. -Expenses

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Listed below are ten organizations followed by a list of phrases that describe or characterize the organizations. Match each phrase with the correct organization. -EITF

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Fundamental qualitative characteristics of accounting information are:

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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. -Recognition

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The FASB's conceptual framework lists relevance and timeliness as the two fundamental qualitative characteristics of decision-useful information.

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The purpose of the conceptual framework is to provide a structure and framework for a consistent set of GAAP.

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The primary responsibility for properly applying GAAP when communicating with investors and creditors through financial statements lies with a firm's auditors.

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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. -Cost-effectiveness

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Which of the following is not a concern expressed by the SEC regarding IFRS adoption by the U.S.?

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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. -Economic entity assumption

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A rules-based approach to standard-setting stresses professional judgment as opposed to following a list of rules.

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