Seminar in Accounting Theory Study Guide Questions
Course Introduction
This course offers an in-depth exploration of contemporary and classical accounting theories, examining the underlying concepts, principles, and frameworks that inform current accounting practices and standards. Students will critically analyze scholarly literature, engage in discussions about the historical evolution and social implications of accounting theories, and evaluate their application to real-world financial reporting and decision-making. The seminar emphasizes research, analytical thinking, and the development of well-supported theoretical arguments, preparing students for advanced study and professional challenges in the accounting field.
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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) In an accounting context, which of the following represents the degree of consensus among measurers in situations where a given group of measurers having similar instruments and constraints group measures the same attribute of a given object?
A)Bias
B)Equality
C)Objectivity
D)Impartiality
Answer: C
Q2) Objectivity may be defined as the degree of consensus among measurers.
A)True
B)False
Answer: True
Q3) Accounting theory is developed and refined by the process of accounting research. A)True
B)False
Answer: True
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Chapter 2: Accounting Theory and Accounting Research
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Q1) The decision-model approach to accounting research is normative.
A)True
B)False
Answer: True
Q2) Critical accounting discourages active social roles for accountants.
A)True
B)False Answer: False
Q3) General deductive reasoning is extremely important in accounting theory and policy-making.
A)True
B)False
Answer: True
Q4) One of the purposes of positive research is to satisfy information demand by managers, auditors, creditors, and standard setters.
A)True
B)False
Answer: True
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Chapter 3: Development of Institutional Structure of Financial Accounting
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Q1) In 1930, the AICPA began working with which of the following organizations to prepare "five broad accounting principles," one of the most important documents in the development of accounting rule making?
A)The SEC
B)The NYSE
C)The AAA
D)The FTC
Answer: B
Q2) In 1918, the American Institute of Accountants (AIA) worked with which of the following organizations to publish minimum standards for conducting a balance sheet audit?
A)The Federal Trade Commission (FTC)
B)The Securities and Exchange Commission (SEC)
C)The American Society of Certified Public Accountants
D)The New York Stock Exchange (NYSE)
Answer: A
Q3) APB Opinions were originally expected to be based on in-depth research studies.
A)True
B)False
Answer: True
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Chapter 4: The Economics of Financial Reporting Regulation
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Q1) Which of the following is not true about the FASB?
A)It considers the economic consequences of proposed accounting policies.
B)It has seriously considered the question of the desirability of corporate social responsibility accounting.
C)It is sensitive to whether there are sufficient benefits to external users to warrant the imposition of new accounting standards.
D)The FASB has commissioned studies to aid in assessing the effects of proposed standards on firms.
Q2) Overproduction of accounting information, or the problem of standards overload, has the greatest effect on large, publicly traded companies.
A)True
B)False
Q3) Which of the following concepts holds that voluntary disclosure is necessary in order for a firm to compete successfully in the market for risk capital?
A)Signalling theory
B)Agency theory
C)Information symmetry
D)Private contracting
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Chapter 5: Postulates, Principles, and Concepts
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Q1) The key imperative postulate in ARS 1 appears to be stability of the monetary unit.
A)True
B)False
Q2) Principles are basic assumptions concerning the business environment.
A)True
B)False
Q3) Which of the following theories assumes that the firm and its owners are separate beings?
A)Residual equity theory
B)Proprietary theory
C)Entity theory
D)Commander theory
Q4) Which of the following concepts focuses on preparers of financial information?
A)Comparability
B)Consistency
C)Uniformity
D)Both b and c
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) Identify and explain the two primary objectives of financial statements and the two secondary objectives of financial statements.
Q2) According to the text, "limited ability" in the Trueblood Committee Report's second financial statement objective may refer to:
A)full disclosure.
B)financial statements designed to meet the special needs of specific users.
C)serving users with specific limitations.
D)both a and b.
Q3) APB Statement No. 4 acknowledges a conflict between the relevance and reliability objectives.
A)True
B)False
Q4) Which of the following standards is related to measurement theory?
A)Quantifiability
B)Freedom from bias
C)Usefulness
D)Objectivity
Q5) List and define the four standards for evaluating accounting that are at the heart of ASOBAT.
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Chapter 7: The Fasbs Conceptual Framework
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Q1) There is a conflict between timeliness and the other aspects of relevance.
A)True
B)False
Q2) Which of the following is a true statement regarding feedback value?
A)It concerns confirming or correcting decision-makers' earlier expectations.
B)It refers to assessing where the firm presently stands.
C)It is closely related to accountability.
D)All of the above.
Q3) SFAC No. 1 maintains that financial statements should be geared toward specific needs of particular user groups.
A)True
B)False
Q4) The quality of understandability is a characteristic influenced by both users and preparers of accounting information.
A)True
B)False
Q5) "Economic consequences" is not part of the conceptual framework.
A)True
B)False
Q6) Discuss the criticisms that of SFAC No. 6?
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Chapter 8: Usefulness of Accounting Information to Investors
and Creditors
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Q1) In the capital asset pricing model, beta is used to represent systematic risk of individual securities and to predict the risk-based price of securities.
A)True
B)False
Q2) Accounting information ranks at the top on surveys that ask investors to weigh the importance of different types of investment information.
A)True
B)False
Q3) Discuss whether alternative accounting policies have a systematic effect on security prices and what this implies about the information content of accounting policy changes. Include a discussion of previous research in this area.
Q4) The three forms of the efficient markets hypothesis are:
A)Weak, semistrong, strong.
B)Slow, quick, instantaneous.
C)Past, current, future.
D)Private, semipublic, public.
Q5) What is cross-sectional valuation and how has this approach been used in research studies?
10
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Chapter 9: Uniformity and Disclosure: Some Policy-Making
Directions
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Q1) Which of the following is \(\underline{not}\) true of accounting allocations?
A)Examples include depreciation and cost of good sold.
B)They are arbitrary.
C)No method can be proved superior to another method.
D)They are not useful in providing financial information.
Q2) Under which of the following circumstances should finite uniformity be used?
A)If the event is a simple event.
B)If the event is a complex event in which relevant circumstances cannot be measured and implemented in a cost-effective manner.
C)If the event is a complex event in which relevant circumstances can be measured and implemented in a cost-effective manner.
D)Both a and b.
Q3) Viewing each interim period as a separate period standing on its own is called:
A)the integral view.
B)the disjointed view.
C)the discrete view.
D)the linked view.
Q4) What is Regulation FD, and how does it relate to the disclosure of information?
Q5) Discuss the role of management in relevant circumstances.
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Chapter 10: International Accounting
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Q1) Professional accounting societies first arose in the United Kingdom in the middle of the 19<sup>th</sup> century.
A)True
B)False
Q2) The IASB has not yet promulgated a conceptual framework.
A)True
B)False
Q3) Anglo-Saxon versus continental differences have been summarized using all but which of the following characteristics?
A)Strength of the accounting profession
B)Population size
C)Strong equity markets as opposed to credit financing from major banking institutions
D)The importance of the country's legal system relative to the setting of accounting rules
Q4) The Netherlands is a continental nation with a largely Anglo-Saxon accounting model.
A)True
B)False
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Chapter 11: The Balance Sheet
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Q1) What are the three distinct types of assets that appear in the balance sheets, and what degree of certainty and measurement reliability does each represent?
Q2) Which of the following is a true statement?
A)Under the articulation approach, all accounting transactions are reported on the income statement.
B)Because income is a subclassification of retained earnings, the income statement and balance sheet articulate.
C)Under articulation, adjustments to the income of prior years are reflected on the current year income statement.
D)All transactions can be easily categorized using the current accounting classification system.
Q3) Unrealized capital adjustments in owners' equity are becoming more prevalent as a result of SFAC No. 130 on comprehensive income.
A)True
B)False
Q4) Inventory is carried at the lower of historical cost or replacement cost.
A)True
B)False
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Chapter 12: The Income Statement
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Q1) Which of the following is the major problem underlying future events and their impact upon event recognition?
A)Management intent
B)The probabilistic nature of future events
C)The perception of the past event
D)Future economic conditions
Q2) The non-operating section of the income statement includes:
A)extraordinary items.
B)extraordinary items and discontinued operations.
C)extraordinary items, accounting principle changes, and discontinued operations.
D)extraordinary items, accounting principle changes, discontinued operations, and prior period adjustments.
Q3) Which of the following is the date that management commits itself to a formal plan to dispose of a business segment?
A)The measurement date
B)The disposal date
C)The assessment date
D)The transfer date
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Chapter 13: Statement of Cash Flows
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Q1) On the statement of cash flows, the proceeds from the sale of equipment would be classified as a financing activity.
A)True
B)False
Q2) An exit-price accounting system provides an estimate of the cash conversion value of a firm's resources.
A)True
B)False
Q3) In the sources section of the statement of changes in financial position, transactions are subclassified into those affecting:
A)the fund balance and other accounts.
B)cash and other accounts.
C)current assets or liabilities and other accounts.
D)liquid assets and other accounts.
Q4) Interest expense and long-term notes payable both appear in the financing section of the cash flow statement.
A)True
B)False
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) Which of the following reflects SFAS No. 109's position regarding tax-loss carryforwards?
A)A tax-loss carryforward should not be recorded because future benefits are uncertain.
B)Any excess of the tax-loss carryforward over deferred tax liabilities should not be booked.
C)A tax-loss carryforward coming from an acquired corporation should not be recognized.
D)A tax-loss carryforward should be booked as an asset in most cases.
Q2) Intraperiod and intrastatement allocation both refer to showing income statement items such as extraordinary items and changes in accounting principle net of the tax effect.
A)True
B)False
Q3) From an economic standpoint, it appears reasonable that deferred tax liabilities should be shown at their present value.
A)True
B)False
Q4) Explain why tax allocation is necessary.
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Chapter 15: Pensions and Other Postretirement Benefits
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Q1) SFAS No. 87 presumes an explicit contract in calculating accrued pension expense.
A)True
B)False
Q2) Which of the following is \(\underline{not}\) true regarding SFAS 158?
A) It brought the overfunded and underfunded status of defined benefit plan to the footnotes of the balance sheet.
B) It required certain costs be charged to other comprehensive income.
C) It requires a credit to other pension income for amortized prior service costs.
D) An overfunded or underfunded amount for OPEBs must be shown as an asset or liability on the balance sheet.
Q3) A shift toward the asset-liability orientation is evident in pension reporting requirements, with both expense measurement and the requirement to recognize a minimum balance sheet liability for unfunded pension benefits.
A)True
B)False
Q4) Identify the four major provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
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Chapter 16: Leases
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Q1) 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
Q2) One of the major arguments for lease capitalization was verifiability.
A)True
B)False
Q3) Which of the following is not a possible treatment of a capital lease?
A)The lessee treats lease payments as periodic expenses.
B)The lessor treats the lease like a sale with vendor financing.
C)The lease is treated by a third party like a loan with income realized through implicit interest in each lease payment.
D)The lessee treats the lease as a purchase with debt financing.
Q4) Prior to ARB 38, the accounting procedure for lease payments was to record them as periodic revenues for lessors and as purchases of assets for lessees.
A)True
B)False
Q5) Discuss two types of economic consequences of lease accounting.
Q6) How does lease accounting under the IASB differ from lease accounting under FAS?
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Chapter 17: Intercorporate Equity Investments
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Q1) A _________ occurs when the subsidiary's shares are distributed to the combinor's shareholders in exchange for shares of the parent's stock.
A)spin-off
B)split-off
C)split-up
D)sell-off
Q2) The equity method is the required reporting method for all less-than-majority owned companies.
A)True
B)False
Q3) A reporting unit for the impairment test would be an operating segment of the firm or one level below.
A)True
B)False
Q4) The FASB was the first standard-setting body to address translation of foreign-based operations and holdings into U.S. dollars.
A)True
B)False
Q5) What is "one-line consolidation," and when is it used?
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