Type:
Test Bank
Resource:
Intermediate Accounting Principles and Analysis
Edition:
2nd Edition
Author(s):
Donald E. Kieso Jerry J. Weygandt Terry D. Warfield
CHAPTER 1 FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS TRUE-FALSE—Conceptual Answer F T T F T T T F F F F F T F T T F F T T T F F F F T T T T F T F T T F
No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35.
Description Definition of financial accounting. Purpose of financial statements. Characteristics of accounting. Environment of accounting. Role of accounting. Definition of financial accounting. Capital allocation process. Financial reports. Fair value information. Objectives of financial reporting. Accrual accounting. Responsibility of accounting. Objectives of financial reporting. Generally accepted accounting principles. Generally accepted accounting principles. Users of financial statements. Committee on Accounting Procedure. Passage of FASB standards. Financial Accounting Concepts. Role of the SEC. American Institute of CPAs. Development of accounting standards. Role of the SEC. Major purpose of the APB. Qualifications of FASB members. FASB Interpretations. FASB Technical Bulletins. Role of the AcSEC. Definition of GAAP. FASB Technical Bulletins. Code of Professional Conduct. Accounting standards. International standards. Expectations gap. Ethical issues.
1-2
Test Bank for Intermediate Accounting, Second Edition
MULTIPLE CHOICE—Conceptual Answer
No.
Description
a d d a b d d c c b c c b c c d d d a b b b c d b c c d c d d d c d d d d d a c
36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75.
Financial accounting. Users of financial reports. Identify the major financial statements. Financial reporting entity. Managerial accounting. Efficient use of resources. Capital allocation process. Financial statement information. Objectives of financial reporting. Accrual accounting. Objectives of financial reporting. Meaning of “generally accepted.” Common set of standards and procedures. Role of the SEC. Powers of the SEC. SEC enforcement. Creation of FASB. Appointment of FASB members. Purpose of the Financial Accounting Foundation. Characteristics of FASB. FASB and "due process" system. Publications of FASB. Purpose of FASB Technical Bulletins. Purpose of Emerging Issues Task Force. Purpose of GASB. Domain of GASB. Standard setting organizations. Identification of standard setting organizations. Statements of financial accounting concepts. FASB members. FASB statement process. House of GAAP. Hierarchy of GAAP. Nature of GAAP. Body which promulgates GAAP. Authoritative category of GAAP. Publications which are not GAAP. Publications which are not GAAP. Political environment of standard setting. International Accounting Standards Board.
EXERCISES Item
Description
E1-76 E1-77 E1-78 E1-79 E1-80
Objectives of financial reporting. Development of accounting principles. Publications and organizations. FASB. Evolution of a statement of financial accounting standards.
Financial Accounting and Accounting Standards
1-3
CHAPTER LEARNING OBJECTIVES 1. Identify the major financial statements and other means of financial reporting. 2. Explain how accounting assists in the efficient use of scarce resources. 3. Describe some of the challenges facing accounting. 4. Identify the objectives of financial reporting. 5. Explain the need for accounting standards. 6. Identify the major policy-setting bodies and their role in the standard-setting process. 7. Explain the meaning of generally accepted accounting principles. 8. Describe the impact of user groups on the standard-setting process. 9. Understand issues related to ethics and financial accounting.
SUMMARY OF LEARNING OBJECTIVES BY QUESTIONS Item
Type
Item
Type
Item
Type
1. 2.
TF TF
3. 36.
TF MC
37. 38.
4.
TF
5.
TF
6.
8.
TF
9.
TF
43.
10. 11.
TF TF
12. 13.
TF TF
44. 45.
14.
TF
15
TF
16.
17. 18. 19. 20. 21.
TF TF TF TF TF
22. 23. 24. 25. 26.
TF TF TF TF TF
27. 28. 49. 50. 51.
29. 30.
TF TF
31. 67.
TF MC
68. 69.
32.
TF
33.
TF
34.
35.
TF
Note:
TF = True-False
Item
Type
Item
Learning Objective 1 MC 39. MC MC 40. MC Learning Objective 2 TF 7. TF 41. Learning Objective 3 MC Learning Objective 4 MC 46. MC MC 76. E Learning Objective 5 TF 47. MC 48. Learning Objective 6 TF 52. MC 57. TF 53. MC 58. MC 54. MC 59. MC 55. MC 60. MC 56. MC 61. Learning Objective 7 MC 70. MC 72. MC 71. MC 73. Learning Objective 8 TF 74. MC 75. Learning Objective 9
MC = Multiple Choice
Type
Item
Type
MC
42.
MC
MC
77.
E
MC MC MC MC MC
62. 63. 64. 65. 66.
MC MC MC MC MC
77.
E
MC MC MC
E = Exercise
Item
Type
77. 78. 79. 80.
E E E E
1-4
Test Bank for Intermediate Accounting, Second Edition
TRUE-FALSE—Conceptual 1. Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations. 2. Financial statements are the principal means through which financial information is communicated to those outside an enterprise. 3. The essential characteristics of accounting include identification and measurement. 4. The environment of accounting is unaffected by social-economic-political-legal conditions, restraints, and influences that vary from time to time. 5. The principal role of accounting is to furnish investors and lenders information that is useful in assessing the prospective risks and returns associated with an investment. 6. Users of the financial information provided by a company use that information to make capital allocation decisions. 7. An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit. 8. Financial reports in the early 21st century did not provide any information about a company’s soft assets. 9. Accounting standards are now less likely to require the recording or disclosure of fair value information due to its inherent subjectivity. 10. While objectives for financial reporting exist on an informal basis, no formal objectives have been adopted. 11. One weakness of accrual accounting is that it does not provide a good indication of the enterprise's present and continuing ability to generate favorable cash flows. 12. Accounting is responsible for providing standards that ensure accurate financial information that cannot be manipulated or improperly reported. 13. One of the objectives of financial reporting is to provide information that is useful in assessing cash flow prospects of the entity being reported on. 14. The difference between generally accepted accounting principles (GAAP) and specifically accepted accounting principles concerns the degree of authority each possesses. 15. Some generally accepted accounting principles have simply been accepted as appropriate because of their universal application rather than due to the action of an authoritative accounting rule-making body. 16. Users of financial accounting statements have both coinciding and conflicting needs for information of various types.
Financial Accounting and Accounting Standards
1-5
17. The Securities and Exchange Commission appointed the Committee on Accounting Procedure. 18. The passage of a new FASB Standards Statement requires the support of five of the seven board members. 19. Financial Accounting Concepts set forth fundamental objectives and concepts that are used in developing future standards of financial accounting and reporting. 20. The SEC relies on the AICPA and FASB to regulate the accounting profession and develop and enforce accounting standards. 21. The American Institute of Certified Public Accountants (AICPA) is the national professional organization of practicing Certified Public Accountants (CPAs). 22. The SEC has been the principal organization in the development of accounting standards. 23. The Securities and Exchange Commission (SEC) sets accounting standards for companies that do work for the government. 24. The major purpose of the APB during its 13-year existence was to develop a single set of accounting standards useful to all business entities. 25. All those who serve on the FASB must be Certified Public Accountants. 26. FASB Interpretations represent modifications or extensions of existing FASB Standards and have the same authority as Standards. 27. FASB Technical Bulletins are designed to provide guidance on the implementation or application of FASB Statements or Interpretations. 28. A major role of the Accounting Standards Executive Committee (AcSEC) is to inform the FASB of financial reporting problems that are developing in practice. 29. Generally accepted accounting principles (GAAP) are defined, in part, as those principles that have substantial authoritative support. 30. FASB Technical Bulletins are more authoritative than FASB Standards and Interpretations. 31. The AICPA’s Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles. 32. Accounting standards are a product of careful logic or empirical findings and are not influenced by political action. 33. Currently, both U.S. GAAP and the International Financial Reporting Standards are acceptable for international use. 34. The expectations gap is caused by what the public thinks accountants should be doing and what accountants think they can do. 35. Ethical issues in financial accounting are governed by the AICPA.
1-6
Test Bank for Intermediate Accounting, Second Edition
True-False Answers—Conceptual Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
1. 2. 3. 4. 5. 6. 7.
F T T F T T T
8. 9. 10. 11. 12. 13. 14.
F F F F F T F
15. 16. 17. 18. 19. 20. 21.
T T F F T T T
22. 23. 24. 25. 26. 27. 28.
F F F F T T T
29. 30. 31. 32. 33. 34. 35.
T F T F T T F
MULTIPLE CHOICE—Conceptual 36.
General-purpose financial statements are the product of a. financial accounting. b. managerial accounting. c. both financial and managerial accounting. d. neither financial nor managerial accounting.
37.
Users of financial reports include all of the following except a. creditors. b. government agencies. c. unions. d. All of these are users.
38.
The financial statements most frequently provided include all of the following except the a. balance sheet. b. income statement. c. statement of cash flows. d. statement of retained earnings.
39.
The information provided by financial reporting pertains to a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. c. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers. d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.
40.
The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization’s operations is called a. financial accounting. b. managerial accounting. c. tax accounting. d. auditing.