Accounting Research Exam Bank
Course Introduction
Accounting Research focuses on the investigation of current issues, methodologies, and trends in the field of accounting. Students learn to critically analyze academic and professional literature, formulate research questions, and apply quantitative and qualitative research methods pertinent to accounting topics. The course emphasizes understanding theoretical frameworks, data collection techniques, and the interpretation of research findings, equipping students with the skills necessary to evaluate and contribute to the body of knowledge in accounting practice, policy, and scholarship.
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Accounting Theory Conceptual Issues in a Political and Economic Environment 9th Edition by Harry
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Chapter 1: An Introduction to Accounting Theory
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Q1) Objectivity may be defined as the degree of consensus among measurers.
A)True
B)False
Answer: True
Q2) In a ratio scale, the zero point implies "nothingness," or the absence of the quality being measured.
A)True
B)False
Answer: True
Q3) Which of the following is not true regarding accounting theory?
A)It includes concepts, valuation models, and hypotheses.
B)It is developed and refined by the process of accounting research.
C)It is concerned with improving financial accounting and statement presentation.
D)It is concerned with insuring that managers and investors are in agreement on how to improve financial statements.
Answer: D
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Chapter 2: Accounting Theory and Accounting Research
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Q1) Information economics has relatively recently included agency theory assumptions in its analysis.
A)True
B)False
Answer: True
Q2) Because accounting is not very much concerned with the human element, we can expect it to be more precise in its measurement and predictions than are the natural sciences.
A)True
B)False
Answer: False
Q3) The objective of information theory analysis is:
A)to determine how optimal contractual arrangement incentives and risk sharing can be negotiated.
B)to determine appropriate alternatives to accrual accounting.
C)to use inductive research techniques to test hypotheses regarding information usefulness.
D)to find alternatives to agency theory assumptions.
Answer: A
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Chapter 3: Development of Institutional Structure of Financial Accounting
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Q1) Which of the following was a controversial issue faced by the Accounting Principles Board (APB)?
A)The investment tax credit
B)Income tax allocation
C)Business combinations and goodwill
D)All of the above
Answer: D
Q2) The Committee on Accounting Procedures (CAP) used a formalized deductive approach to develop a comprehensive accounting theory.
A)True
B)False
Answer: False
Q3) Which of the following factors led to significant changes in accounting practices?
A)The Great Depression of 1929
B)The election of Franklin D. Roosevelt to the presidency in 1932
C)The enactment of the New Deal legislation
D)All of the above
Answer: D
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Chapter 4: The Economics of Financial Reporting Regulation
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Q1) All of the arguments supporting the case for unregulated markets relate to the incentives for a firm to report information about itself to owners and to the capital market in general.
A)True
B)False
Q2) Which of the following concepts holds that anyone who genuinely desires information about a firm is able to obtain it?
A)Signalling theory
B)Agency theory
C)Information symmetry
D)Private contracting
Q3) The value of a company can be increased when the firm voluntarily reports private information about itself if the information reduces uncertainty about the firm's future prospects.
A)True
B)False
Q4) Only firms that perform well have incentives to report their operating results. A)True
B)False
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Chapter 5: Postulates, Principles, and Concepts
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Q1) Output-oriented principles are broad rules that guide the accounting function.
A)True
B)False
Q2) Some capital markets research has indicated that "bad news" relative to reported earnings has a greater impact upon security prices than "good news."
A)True
B)False
Q3) Postulates are generally defined as basic assumptions that cannot be verified.
A)True
B)False
Q4) Which of the following is a true statement?
A)A principle contains elements observable by empirical techniques.
B)The APB's Special Committee on Research Program defined both postulates and broad principles.
C)A principle is an analytical statement whose truth or falsity is self-contained by its internal logic.
D)Postulates are generally defined as basic assumptions that cannot be verified.
Q5) Discuss the matching principle and how it applies to recognizing expenses. Why is the matching principle currently under attack?
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Chapter 6: The Search for Objectives
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Q1) According to Sorter and Gans, which of the following describes the intent of the Trueblood Committee Report's second financial statement objective?
A)Financial statements should serve those with limited ability.
B)Financial statements should serve special needs of specific users.
C)Financial statements should serve the general needs of users.
D)Financial statement should serve only those users who are very knowledgeable about financial statements and information.
Q2) Several important committee reports gave rise to objectives and standards in place of the postulates and principles approach.
A)True
B)False
Q3) A problem brought up by SATTA is the diversity of users in terms of their decisions and their possible different information needs.
A)True
B)False
Q4) Identify the major contributions of APB Statement 4.
Q5) How did the definition of accounting change from the period before ASOBAT to the issuance of SATTA in 1977?
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Chapter 7: The Fasbs Conceptual Framework
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Q1) Competitive disadvantage is an indirect cost of published information.
A)True
B)False
Q2) Codification is a justification of the standard-setting process itself rather than of the individual standards that result from that process.
A)True
B)False
Q3) Timeliness and predictive value are the two main aspect of relevance.
A)True
B)False
Q4) The conceptual framework maintains that accounting reports should become the only relevant source of information about enterprises.
A)True
B)False
Q5) Relevance and reliability are the primary characteristics that standard setters should be concerned with.
A)True
B)False
Q6) Discuss the criticisms that of SFAC No. 6?
Page 9
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Chapter 8: Usefulness of Accounting Information to
Investors and Creditors
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Q1) Residual income can be used as a company and intra-company performance measurement tool.
A)True
B)False
Q2) Residual income refers to income in excess of a charge for the capital that is employed to generate that income.
A)True
B)False
Q3) Which of the following is \(\underline{not}\) true regarding capital market research?
A)Studies have found a low correlation between the variability of accounting earnings and beta.
B)Studies have found a strong association between accounting-based ratios and the market measure of risk.
C)Studies have found that supplemental segment (line of business) disclosures resulted in a revision of systematic risk, indicating that such information is useful for risk assessments.
D)At least one study has found that pension information is not useful for risk assessments.
Page 10
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Chapter 9: Uniformity and Disclosure: Some Policy-Making
Directions
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Q1) What is meant by relevant circumstances? Describe the two types of relevant circumstances.
Q2) Protective disclosure and informative disclosure are two types of disclosures as interpreted by the:
A)FTC.
B)FASB.
C)AICPA.
D)SEC.
Q3) The treatment of loss contingencies required in SFAS No. 5 is an example of:
A)elastic uniformity.
B)conservatism.
C)flexible uniformity.
D)rigid uniformity.
Q4) Lev advocated restricting disclosures to "good news" items only. A)True
B)False
Q5) Distinguish between finite uniformity, rigid uniformity, and flexibility. Also, explain when each is appropriately used.
11
Q6) How does the concept of uniformity relate to comparability in the accounting literature?
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Chapter 10: International Accounting
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Q1) Harmonization of IASB and FASB standards is now being called:
A)benchmarking.
B)conformity.
C)uniformity.
D)convergence.
Q2) Which of the following terms is used to refer to harmonization among accounting practice of different enterprises?
A)Formal harmonization
B)Material harmonization
C)De jure harmonization.
D)Convergence
Q3) The US is an example of:
A)the Anglo-Saxon model.
B)the continental model.
C)the ASEAN model.
D)the international model.
Q4) The continental model of financial reporting generally presents a strong accounting profession.
A)True
B)False
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Chapter 11: The Balance Sheet
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Q1) An asset should be initially recorded at either its historical acquisition cost or its cash equivalent purchase price, whichever is greater.
A)True
B)False
Q2) Which of the following is not true regarding derivatives?
A)A derivative is a financial instrument whose value is based upon another financial instrument, stock index or interest rate, or interest rate index.
B)Derivatives can be classified into two general types: forward-based and option-based derivatives.
C)Unrealized holding gains and losses on derivatives are not recognized.
D)SFAS No. 133 values derivatives at fair value.
Q3) A constructive obligation is one that is implied rather than expressly written.
A)True
B)False
Q4) Which one of the following measurement bases applies to receivables?
A)Historical cost
B)An approximation of net realizable value
C)Selling price through factoring
D)Discounted present value
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Chapter 12: The Income Statement
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Q1) The major expense-recognition problem concerns those costs that are clearly not expired in the period incurred but are clearly not associated with the revenues of a particular period.
A)True
B)False
Q2) A troubled debt restructuring occurs when a creditor, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider.
A)True
B)False
Q3) All empirical evidence supports the all-inclusive income concept.
A)True
B)False
Q4) The expense recognition model based on historical cost, as well as the model based on current value, must allocate the costs incurred.
A)True
B)False
Q5) What is "comprehensive income," and how does SFAS No. 120 allow it to be reported?
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Chapter 13: Statement of Cash Flows
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Q1) Most firms elected to define funds in the statement of changes in financial position as:
A)cash.
B)working capital.
C)current assets.
D)owners' equity.
Q2) Which of the following methods starts with accrual income and adjusts it for the non-cash items it contains?
A)The indirect method
B)The direct method
C)Both a and b
D)None of the above
Q3) Only transactions having a direct effect on fund accounts were included in the statement of changes in financial position.
A)True
B)False
Q4) Discuss how Ingram and Lee used the cash flow statement in conjunction with the income statement for analytical purposes.
Q5) How does the statement of cash flows sometimes cause a non-articulation problem?
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Chapter 14: Income Taxes and Financial Accounting
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Q1) Amounts recognized as revenue on the financial statements but not yet included in tax income generate deferred tax assets.
A)True B)False
Q2) SFAS No. 96 switched from the revenue-expense (matching) orientation of APB Opinion No. 11 to the asset-liability viewpoint.
A)True B)False
Q3) Consistency appears to dictate that neither tax liabilities nor deferred credits, under either the comprehensive or partial allocation approaches, should be discounted. A)True B)False
Q4) The income tax law of 1913 established accounting income as a basis for taxation. A)True B)False
Q5) Explain why tax allocation is necessary.
Q6) What are the arguments for discounting deferred tax liabilities?
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Chapter 15: Pensions and Other Postretirement Benefits
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Q1) What have research studies indicated about whether a firm's unfunded pension benefits are interpreted as liabilities?
Q2) Which of the following accounting standards began a shift toward an asset-liability orientation in pension reporting?
A)APB Opinion 8
B)SFAS No. 87
C)SFAS No. 106
D)SFAS No. 132
Q3) SFAS No. 87 is no longer in effect, having been replaced by SFAS 132.
A)True
B)False
Q4) In calculating the service cost portion of pension expense, future salaries need not be estimated.
A)True
B)False
Q5) With an accumulated benefit approach, the discount rate includes a general inflation factor.
A)True
B)False
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Chapter 16: Leases
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Q1) Respond to the following:
a.Why has so much attention been given to leases in accounting standards?
b.Why is leasing such a popular method of acquiring assets?
c.How have accounting procedures for leases changed since ARB 43?
Q2) The first lease accounting standard was issued in 1966.
A)True
B)False
Q3) Respond to the following:
a.What are the current criteria for capitalization identified in SFAS No. 13?
b.How is the minimum lease payment calculated?
Q4) Discuss two types of economic consequences of lease accounting.
Q5) What was the intent of APB Opinion No. 27?
A)To achieve near symmetry in lessee and lessor accounting
B)To expand the use of the material-equity method
C)To broaden the criteria for capitalization
D)To restrict the criteria for capitalization
Q6) A sale and leaseback occurs when the owner of an asset sells it and enters into a lease agreement to lease the asset back.
A)True
B)False
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Chapter 17: Intercorporate Equity Investments
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Q1) In the terminology suggested by the FASB, which of the following terms refers to the separate business enterprises that enter into a business combination?
A)Constituent companies
B)Combined companies
C)Subsidiary companies
D)Consolidated companies
Q2) With the new entity approach, consolidation of assets and liabilities occurs only to the extent of the stock acquired by the parent.
A)True
B)False
Q3) Discuss why the reporting of disaggregated data may be preferable to consolidated data.
Q4) It is difficult to attract investors to SPEs because the cash flows and the risks involved are hard to predict.
A)True
B)False
Q5) What is meant by proportionate consolidation, and what are its advantages?
Q6) What were special purpose entities (SPEs) and what were their advantages?
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