Question 1

The primary objective of financial accounting information is to provide useful information to:

Accepted Answer

A)  Management.
B)  Capital providers.
C)  Regulators.
D)  None of the above.E) None of the above
F) B) and C)

Question 2

List and briefly describe the five measurement attributes used commonly in current GAAP.

Accepted Answer

a. Historical cost: the amount given or ...

Question 3

Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting?

Accepted Answer

A)  Timeliness.
B)  Better reflecting economic activity.
C)  Periodicity.
D)  Better matching of revenues and expenses.E) A) and B)
F) All of the above

Question 4

In IFRS, the conceptual framework indicates appropriate accounting when a more specific accounting standard does not apply.

Accepted Answer

A) True 
 B)False

Question 5

The revenue/expense approach emphasizes determining the appropriate amounts of revenue and expense in each reporting period.

Accepted Answer

A) True 
 B)False

Question 6

Porite Company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash. Porite's practice is an example of:

Accepted Answer

A)  Cash basis accounting.
B)  Accrual accounting.
C)  The matching principle.
D)  Economic entity.E) All of the above
F) A) and D)

Question 7

In a recent annual report, Apple Computer reported the following in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This note exemplifies Apple's use of:

Accepted Answer

A)  Conservatism.
B)  The matching principle.
C)  Realization principle.
D)  Economic entity.E) A) and B)
F) B) and D)

Question 8

The Public Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) changed the entity responsible for setting auditing standards in the United States.

Accepted Answer

A) True 
 B)False

Question 9

The main issue in the debate over accounting for employee stock options was:

Accepted Answer

A)  Which employees should receive options.
B)  The amount of compensation expense that a company should recognize.
C)  How many options should be granted to key executives.
D)  The tax consequences of employee stock options.E) A) and D)
F) B) and D)

Question 10

Contrast the role of the conceptual framework in U.S. GAAP and IFRS.

Accepted Answer

The conceptual frameworks in U.S. GAAP a...

Question 11

Contrast the asset/liability and revenue/expense approaches to accounting standard setting.

Accepted Answer

Under the revenue/expense approach, we e...

Question 12

Phase A of the new conceptual framework focuses on:

Accepted Answer

A)  Objective and qualitative characteristics.
B)  Presentation and disclosure.
C)  Recognition and measurement.
D)  Elements of financial statements.E) A) and C)
F) C) and D)

Question 13

The most likely important flaw leading to the demise of the APB was the perceived lack of:

Accepted Answer

A)  Confidence.
B)  Competence.
C)  Independence.
D)  Importance.E) All of the above
F) A) and D)

Question 14

Which of the following is not an identified valuation technique in GAAP regarding fair value measurement?

Accepted Answer

A)  Cost approach.
B)  Market approach.
C)  Cost-benefit approach.
D)  Income approach.E) C) and D)
F) All of the above

Question 15

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) None of the above

Question 16

What are the key provisions of the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002?

Accepted Answer

The Act requires the regulation of audit...

Question 17

According to the conceptual framework, verifiability implies:

Accepted Answer

A)  Legal evidence.
B)  Logic.
C)  Consensus.
D)  Legal verdict.E) A) and B)
F) A) and C)

Question 18

CPAs are licensed by:

Accepted Answer

A)  The AICPA.
B)  The SEC.
C)  The federal government.
D)  State governments.E) B) and C)
F) A) and D)

Question 19

Pronouncements issued by the Committee on Accounting Procedures:

Accepted Answer

A)  Dealt with specific accounting and reporting problems.
B)  Were based on exposure drafts and public comment letters.
C)  Originated from congressional studies and SEC directives.
D)  Were the outcome of research studies and a theoretical framework.E) A) and B)
F) A) and C)

Question 20

The conceptual framework's qualitative characteristic of faithful representation includes:

Accepted Answer

A)  Predictive value.
B)  Neutrality.
C)  Confirmatory value.
D)  Timeliness.E) B) and C)
F) C) and D)

Exam 1: Environment and Theoretical Structure of Financial Accounting

What are the key provisions of the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002?

Correct AnswerverifiedThe Act requires the regulation of audit...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The Public Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) changed the entity responsible for setting auditing standards in the United States.

Correct AnswerverifiedShow Answer

The most likely important flaw leading to the demise of the APB was the perceived lack of:

Correct AnswerverifiedShow Answer

The main issue in the debate over accounting for employee stock options was:

Correct AnswerverifiedShow Answer

Contrast the asset/liability and revenue/expense approaches to accounting standard setting.

Correct AnswerverifiedUnder the revenue/expense approach, we e...View AnswerShow Answer

Which of the following is not an identified valuation technique in GAAP regarding fair value measurement?

Correct AnswerverifiedShow Answer

List and briefly describe the five measurement attributes used commonly in current GAAP.

Correct Answerverifieda. Historical cost: the amount given or ...View AnswerShow Answer

Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting?

Correct AnswerverifiedShow Answer

The primary objective of financial accounting information is to provide useful information to:

Correct AnswerverifiedShow Answer

CPAs are licensed by:

Correct AnswerverifiedShow Answer

In IFRS, the conceptual framework indicates appropriate accounting when a more specific accounting standard does not apply.

Correct AnswerverifiedShow Answer

Pronouncements issued by the Committee on Accounting Procedures:

Correct AnswerverifiedShow Answer

The revenue/expense approach emphasizes determining the appropriate amounts of revenue and expense in each reporting period.

Correct AnswerverifiedShow Answer

According to the conceptual framework, verifiability implies:

Correct AnswerverifiedShow Answer

The conceptual framework's qualitative characteristic of faithful representation includes:

Correct AnswerverifiedShow Answer

Phase A of the new conceptual framework focuses on:

Correct AnswerverifiedShow Answer

Contrast the role of the conceptual framework in U.S. GAAP and IFRS.

Correct AnswerverifiedThe conceptual frameworks in U.S. GAAP a...View AnswerShow Answer

Porite Company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash. Porite's practice is an example of:

Correct AnswerverifiedShow Answer

In a recent annual report, Apple Computer reported the following in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This note exemplifies Apple's use of:

Correct AnswerverifiedShow Answer

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The Act requires the regulation of audit...
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Under the revenue/expense approach, we e...
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a. Historical cost: the amount given or ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The conceptual frameworks in U.S. GAAP a...
View Answer

Correct Answer
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Correct Answer
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