Question 1

Accounting judgment occurs when managers manipulate financial information and misrepresent the firm's financial position.

Accepted Answer

A) True 
 B)False  False

Question 2

The fourth step in the financial accounting research process may require you to ________.

Accepted Answer

A)  cross reference information in the Codification 
B)  change or refine your research question 
C)  work down the levels of the hierarchy to identify a similar transaction 
D)  draft a memo 
A)  cross reference information in the Codification 
B)  change or refine your research question 
C)  work down the levels of the hierarchy to identify a similar transaction 
D)  draft a memo B

Question 3

Airlines Insider is a well-respected publication for the airline industry. The publication prescribes a certain accounting treatment which differs from what is indicated in the Codification. How should this be handled?

Accepted Answer

A)  Follow the treatment discussed in Airlines Insider. 
B)  Follow the treatment discussed in the Codification. 
C)  Choose whichever treatment is most conservative. 
D)  Create a blend of the two treatments. 
A)  Follow the treatment discussed in Airlines Insider. 
B)  Follow the treatment discussed in the Codification. 
C)  Choose whichever treatment is most conservative. 
D)  Create a blend of the two treatments. B

Question 4

The GAAP Hierarchy has ________ levels and the IFRS Hierarchy has ________ levels.

Accepted Answer

A)  two; three 
B)  three; three 
C)  three; four 
D)  three; two 
A)  two; three 
B)  three; three 
C)  three; four 
D)  three; two

Question 5

Accounting standards allow financial statement preparers to use judgement in a manner that best represents ________.

Accepted Answer

A)  earnings management 
B)  estimated reality 
C)  a firm's financial position 
D)  economic reality 
A)  earnings management 
B)  estimated reality 
C)  a firm's financial position 
D)  economic reality

Question 6

Which of the following is most likely based on an assumption?

Accepted Answer

A)  how to record petty cash transactions 
B)  decision about which method of depreciation to use 
C)  the balance in the cash account 
D)  the value of the accounts payable account 
A)  how to record petty cash transactions 
B)  decision about which method of depreciation to use 
C)  the balance in the cash account 
D)  the value of the accounts payable account

Question 7

Identify the level of the U.S. GAAP Literature Hierarchy that each item belongs to.
 $$\begin{array} { | l | l | } 
\hline \text { Authoritative Literature } & \text { Level } \
\hline \text { The Codification } & \
\hline \text { Industry practice } & \
\hline \text { AICPA Issue Papers } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \t

Question 8

Acquiring research skills ________.

Accepted Answer

A)  is something that comes naturally to most accountants 
B)  takes a great deal of practice 
C)  is not necessary because the business environment is constantly changing 
D)  None of the above 
A)  is something that comes naturally to most accountants 
B)  takes a great deal of practice 
C)  is not necessary because the business environment is constantly changing 
D)  None of the above

Question 9

Very few amounts reported on the financial statements are based upon assumptions.

Accepted Answer

A) True 
 B)False

Question 10

Explain why allowing management and their accountants to choose between various accounting methods when applying accounting standards is a good thing as opposed to requiring strict compliance with the application of specific methods.

Accepted Answer

The flexibility afforded in the selectio

Question 11

Ron Fowler, CPA isn't quite sure how to handle a deferred cost transaction. In which topic grouping should he begin his research?

Accepted Answer

A)  2XX 
B)  3XX 
C)  4XX 
D)  5XX 
A)  2XX 
B)  3XX 
C)  4XX 
D)  5XX

Question 12

The first step in the accounting research process is to establish and understand the facts.

Accepted Answer

A) True 
 B)False

Question 13

Financial statement users rely on the accounting policies footnote information to compare a company to other firms in the same industry.

Accepted Answer

A) True 
 B)False

Question 14

Typically, ________ use the applied financial accounting research process.

Accepted Answer

A)  auditors 
B)  investors 
C)  financial statement preparers 
D)  Both A & C 
A)  auditors 
B)  investors 
C)  financial statement preparers 
D)  Both A & C

Question 15

Best practice suggests that accountants should commit the accounting standards to memory.

Accepted Answer

A) True 
 B)False

Question 16

List five issues that are typically addressed in a company's accounting policy footnote.

Accepted Answer

Correct answers include:
Revenue recogni

Question 17

Psychics R' Us has a new and unique revenue stream, but they are unsure when to recognize the revenue. Their accountant is unsure as well. In which topic grouping would she find more information about revenue recognition?

Accepted Answer

A)  6XX 
B)  7XX 
C)  8XX 
D)  9XX 
A)  6XX 
B)  7XX 
C)  8XX 
D)  9XX

Question 18

Complete the following table. Identify which cognitive bias is represented in each example.
 $$\begin{array} { | l | l | } 
\hline\text { Example } & \text { Cognitive Bias } \
\hline \text { Wolf Co. is looking to purchase a new computer. The manager noticed } & \
\text { pne model that advertised free maintenance for one year. He appears to } & \
\text { be more focused on the free maintenance than the specs of the model. } & \
\hline \text { Sydney, Inc. needs new copiers. The manager was asked to research the } & \
\text { latest models, but instead purchased the same model as they did last year. } & \
\hline \text { S \& C Company needs to upgrade the office computers. The salesperson } & \
\text { demonstrated how Brand A (which the staff prefer) will run all the } & \
\text { required software and provide increased functionality. However, the } & \
\text { manager in charge of decision making for the purchase prefers Brand B - } \
\text { and only 'listened' to the presentation to be polite. }\
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \t

Question 19

What are the Codification topic number and the International Accounting Standards number in which you would begin your research into a question about revenue recognition?

Accepted Answer

Codification Topic 6

Question 20

Cognitive bias is an attitude that includes a questioning mind and critical assessment of evidence.

Accepted Answer

A) True 
 B)False

Exam 3: Judgment and Applied Financial Accounting Research

Accounting judgment occurs when managers manipulate financial information and misrepresent the firm's financial position.

The fourth step in the financial accounting research process may require you to ________.

Airlines Insider is a well-respected publication for the airline industry. The publication prescribes a certain accounting treatment which differs from what is indicated in the Codification. How should this be handled?

The GAAP Hierarchy has ________ levels and the IFRS Hierarchy has ________ levels.

Accounting standards allow financial statement preparers to use judgement in a manner that best represents ________.

Which of the following is most likely based on an assumption?

Identify the level of the U.S. GAAP Literature Hierarchy that each item belongs to. Authoritative Literature Level The Codification Industry practice AICPA Issue Papers

Acquiring research skills ________.

Very few amounts reported on the financial statements are based upon assumptions.

Explain why allowing management and their accountants to choose between various accounting methods when applying accounting standards is a good thing as opposed to requiring strict compliance with the application of specific methods.

Ron Fowler, CPA isn't quite sure how to handle a deferred cost transaction. In which topic grouping should he begin his research?

The first step in the accounting research process is to establish and understand the facts.

Financial statement users rely on the accounting policies footnote information to compare a company to other firms in the same industry.

Typically, ________ use the applied financial accounting research process.

Best practice suggests that accountants should commit the accounting standards to memory.

List five issues that are typically addressed in a company's accounting policy footnote.

Psychics R' Us has a new and unique revenue stream, but they are unsure when to recognize the revenue. Their accountant is unsure as well. In which topic grouping would she find more information about revenue recognition?

What are the Codification topic number and the International Accounting Standards number in which you would begin your research into a question about revenue recognition?

Cognitive bias is an attitude that includes a questioning mind and critical assessment of evidence.

The Financial Reporting Environment

Financial Reporting Theory

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

The GAAP Hierarchy has levels and the IFRS Hierarchy has levels.