Question 1

The most political issue in the FASB's most recent deliberations and pronouncements on business combinations was:

Accepted Answer

A)  The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the purchase method of accounting for the combination.
B)  The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the pooling method of accounting for the combination.
C)  The unrealistic balance sheet assets that would be created if firms were required to use the purchase method of accounting for the combination.
D)  The unrealistic balance sheet assets that would be created if firms were required to use the pooling method of accounting for the combination.E) A) and C)
F) A) and B)

Question 2

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)  Full disclosure principleE) All of the above
F) None of the above

Question 3

A cause-and-effect relationship is implicit in the:

Accepted Answer

A)  Realization principle.
B)  Historical cost principle.
C)  Matching principle.
D)  Going concern assumption.E) A) and B)
F) None of the above C

Question 4

Which of the following groups is not among financial intermediaries?

Accepted Answer

A)  Mutual fund managers
B)  Financial analysts
C)  CPAs
D)  Credit rating organizationsE) None of the above
F) All of the above

Question 5

Conservatism is a desired qualitative characteristic of accounting information.

Accepted Answer

A) True 
 B)False

Question 6

What provisions did the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002 make for performance of non-audit services by an audit firm?

Accepted Answer

The law makes it unlawful for the audito...

Question 7

Identify or define the following terms: a. economic entity, b. going concern.

Accepted Answer

Economic entity - All economic events ca...

Question 8

Compare the 2006 net income (loss) for Amazon.com to its net cash flow from operating activities. Why are these amounts different? Briefly explain.

Accepted Answer

These amounts are different because of t...

Question 9

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

Accepted Answer

A)  SFAC 1
B)  SFAC 2
C)  SFAC 5
D)  SFAC 6E) B) and C)
F) A) and D)

Question 10

When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic?

Accepted Answer

A)  Verifiability.
B)  Predictive value.
C)  Representational faithfulness.
D)  Timeliness.E) B) and D)
F) C) and D)

Question 11

SFAC No.1 focuses on:

Accepted Answer

A)  Objectives of financial reporting.
B)  Qualitative characteristics of accounting information.
C)  Recognition and measurement concepts in accounting.
D)  Elements of financial statements.E) C) and D)
F) All of the above A

Question 12

Explain and show an example of how the FASB's conceptual framework is needed in formulating standards on controversial topics.

Accepted Answer

There are many possible examples here. F...

Question 13

Which of the following is not true about net operating cash flow?

Accepted Answer

A)  It is the difference between cash receipts and cash disbursements from providing goods and services.
B)  It is a measure used in accrual accounting and is recognized as the best predictor of future operating cash flows.
C)  Over short periods of time, it may not be indicative of long-run cash-generating ability.
D)  It is easy to understand and all information required to measure it is factual.E) A) and B)
F) None of the above

Question 14

GAAP is an abbreviation for:

Accepted Answer

A)  Generally authorized accounting procedures.
B)  Generally applied accounting procedures.
C)  Generally accepted auditing practices.
D)  Generally accepted accounting principles.E) B) and D)
F) A) and C)

Question 15

One of the elements that many believe distinguishes a profession from other occupations is the acceptance by its members of a responsibility for the interests of those it serves, often articulated in:

Accepted Answer

A)  Its conceptual framework.
B)  Its code of ethics.
C)  Federal laws.
D)  State laws.E) None of the above
F) B) and C)

Question 16

Independent auditors express an opinion on the:

Accepted Answer

A)  Fairness of financial statements.
B)  Accuracy of financial statements.
C)  Soundness of a company's future.
D)  Quality of a company's management.E) None of the above
F) B) and C) A

Question 17

Primary qualitative characteristics of accounting information are:

Accepted Answer

A)  Relevance and comparability.
B)  Comparability and consistency.
C)  Reliability and relevance.
D)  Reliability and consistency.E) None of the above
F) C) and D)

Question 18

Constraints on qualitative characteristics of accounting information include:

Accepted Answer

A)  Timeliness.
B)  Going concern.
C)  Neutrality.
D)  Conservatism.E) B) and C)
F) A) and D)

Question 19

According to the conceptual framework, verifiability implies:

Accepted Answer

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

Question 20

Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow.

Accepted Answer

A) True 
 B)False

Exam 1: Environment and Theoretical Structure of Financial Accounting

The most political issue in the FASB's most recent deliberations and pronouncements on business combinations was:

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

A cause-and-effect relationship is implicit in the:

Correct AnswerverifiedC

Which of the following groups is not among financial intermediaries?

Correct AnswerverifiedShow Answer

Conservatism is a desired qualitative characteristic of accounting information.

Correct AnswerverifiedShow Answer

What provisions did the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002 make for performance of non-audit services by an audit firm?

Correct AnswerverifiedThe law makes it unlawful for the audito...View AnswerShow Answer

Identify or define the following terms: a. economic entity, b. going concern.

Correct AnswerverifiedEconomic entity - All economic events ca...View AnswerShow Answer

Compare the 2006 net income (loss) for Amazon.com to its net cash flow from operating activities. Why are these amounts different? Briefly explain.

Correct AnswerverifiedThese amounts are different because of t...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic?

Correct AnswerverifiedShow Answer

SFAC No.1 focuses on:

Correct AnswerverifiedA

Explain and show an example of how the FASB's conceptual framework is needed in formulating standards on controversial topics.

Correct AnswerverifiedThere are many possible examples here. F...View AnswerShow Answer

Which of the following is not true about net operating cash flow?

Correct AnswerverifiedShow Answer

GAAP is an abbreviation for:

Correct AnswerverifiedShow Answer

One of the elements that many believe distinguishes a profession from other occupations is the acceptance by its members of a responsibility for the interests of those it serves, often articulated in:

Correct AnswerverifiedShow Answer

Independent auditors express an opinion on the:

Correct AnswerverifiedA

Primary qualitative characteristics of accounting information are:

Correct AnswerverifiedShow Answer

Constraints on qualitative characteristics of accounting information include:

Correct AnswerverifiedShow Answer

According to the conceptual framework, verifiability implies:

Correct AnswerverifiedShow Answer

Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow.

Correct AnswerverifiedShow Answer

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The law makes it unlawful for the audito...
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Economic entity - All economic events ca...
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These amounts are different because of t...
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A

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There are many possible examples here. F...
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A

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