Question 1

Which of the following was the first private-sector entity that set accounting standards in the United States?

Accepted Answer

A)  Accounting Principles Board.
B)  Committee on Accounting Procedure.
C)  Financial Accounting Standards Board.
D)  AICPA.E) All of the above
F) A) and B)

Question 2

The International Accounting Standards Board:

Accepted Answer

A)  Was the predecessor to the IASC.
B)  Can overrule the FASB when their policies disagree.
C)  Promotes the use of high-quality, understandable global accounting standards.
D)  Has its headquarters in Geneva.E) C) and D)
F) B) and C)

Question 3

Gains or losses result, respectively, from the disposition of business assets for greater than, or less than, their book values.

Accepted Answer

A) True 
 B)False

Question 4

The full disclosure principle requires a balance between:

Accepted Answer

A)  Comparability and consistency.
B)  Relevance and cost-effectiveness.
C)  Reliability and neutrality.
D)  Timeliness and predictive value.E) A) and D)
F) B) and C)

Question 5

To meet the needs of full disclosure, companies use supplemental information, including:

Accepted Answer

A)  Parenthetical comments or modifying comments placed on the face of the financial statements.
B)  Disclosure notes conveying additional insights about company operations, accounting principles, contractual agreements, and pending litigation.
C)  Supplemental financial statements that report more detailed information than is shown in the primary financial statements.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 6

What is the SEC and how is it involved with accounting standard setting?

Accepted Answer

The Securities and Exchange Commission i...

Question 7

Give an example of a violation of the stable monetary unit assumption. How would it affect the quality of financial statement information?

Accepted Answer

If a country experiences severe inflatio...

Question 8

Which of the following best demonstrates the full disclosure principle?

Accepted Answer

A)  The multi-step income statement.
B)  The auditors' report.
C)  The company's tax return.
D)  Disclosure notes to financial statements.E) B) and D)
F) A) and C)

Question 9

Which of the following has the statutory authority to set accounting standards in the United States?

Accepted Answer

A)  FASB.
B)  IRS.
C)  SEC.
D)  AICPA.E) All of the above
F) A) and C)

Question 10

Ford Motor Company purchases services from suppliers on account and sells its products to distributors on short-term credit. As a result, do each of these events affect net income faster than they affect net operating cash flows?

Accepted Answer

A)  Option a
B)  Option b
C)  Option c
D)  Option dE) A) and C)
F) A) and B)

Question 11

Elements of financial statements do not include:

Accepted Answer

A)  Monetary unit.
B)  Investments by owners.
C)  Comprehensive income.
D)  Losses.E) A) and B)
F) A) and C)

Question 12

How does GAAP define fair value?

Accepted Answer

Fair value is defined as the p...

Question 13

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

Accepted Answer

A)  Corporate executive accountability.
B)  Auditor rotation.
C)  Retention of work papers.
D)  All of the above are provisions of the Act.E) A) and B)
F) A) and C)

Question 14

Equity is a residual amount representing the owner's interest in the assets of the business.

Accepted Answer

A) True 
 B)False

Question 15

The primary focus for financial accounting information is to provide information useful for:

Accepted Answer

A)  Option a
B)  Option b
C)  Option c
D)  Option dE) A) and B)
F) A) and C)

Question 16

The purpose of the conceptual framework is to provide a structure and framework for a consistent set of GAAP.

Accepted Answer

A) True 
 B)False

Question 17

The asset/liability approach emphasizes matching to determine what assets and liabilities should be reflected on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

Compute the cash balance at the end of the first year for Tri Fecta.

Accepted Answer

The answer of Compute the cash balance at the end...

Question 19

Compute Amazon's cost of goods sold for the year.

Accepted Answer

Gross profit = Net sales - Cos...

Question 20

SFAC No.5 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) B) and C)
F) C) and D)

Exam 1: Environment and Theoretical Structure of Financial Accounting

The International Accounting Standards Board:

Correct AnswerverifiedShow Answer

Compute the cash balance at the end of the first year for Tri Fecta.

Correct AnswerverifiedShow Answer

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

Correct AnswerverifiedShow Answer

The full disclosure principle requires a balance between:

Correct AnswerverifiedShow Answer

The asset/liability approach emphasizes matching to determine what assets and liabilities should be reflected on the balance sheet.

Correct AnswerverifiedShow Answer

The primary focus for financial accounting information is to provide information useful for:

Correct AnswerverifiedShow Answer

What is the SEC and how is it involved with accounting standard setting?

Correct AnswerverifiedThe Securities and Exchange Commission i...View AnswerShow Answer

Compute Amazon's cost of goods sold for the year.

Correct AnswerverifiedGross profit = Net sales - Cos...View AnswerShow Answer

To meet the needs of full disclosure, companies use supplemental information, including:

Correct AnswerverifiedShow Answer

SFAC No.5 focuses on:

Correct AnswerverifiedShow Answer

How does GAAP define fair value?

Correct AnswerverifiedFair value is defined as the p...View AnswerShow Answer

Give an example of a violation of the stable monetary unit assumption. How would it affect the quality of financial statement information?

Correct AnswerverifiedIf a country experiences severe inflatio...View AnswerShow Answer

Gains or losses result, respectively, from the disposition of business assets for greater than, or less than, their book values.

Correct AnswerverifiedShow Answer

Which of the following best demonstrates the full disclosure principle?

Correct AnswerverifiedShow Answer

The purpose of the conceptual framework is to provide a structure and framework for a consistent set of GAAP.

Correct AnswerverifiedShow Answer

Equity is a residual amount representing the owner's interest in the assets of the business.

Correct AnswerverifiedShow Answer

Elements of financial statements do not include:

Correct AnswerverifiedShow Answer

Which of the following was the first private-sector entity that set accounting standards in the United States?

Correct AnswerverifiedShow Answer

Ford Motor Company purchases services from suppliers on account and sells its products to distributors on short-term credit. As a result, do each of these events affect net income faster than they affect net operating cash flows?

Correct AnswerverifiedShow Answer

Which of the following has the statutory authority to set accounting standards in the United States?

Correct AnswerverifiedShow Answer

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The Securities and Exchange Commission i...
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Gross profit = Net sales - Cos...
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Fair value is defined as the p...
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If a country experiences severe inflatio...
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