Question 1

Which of the following balances is most likely based on an estimate?

Accepted Answer

A)  Net accounts receivable 
B)  Net accounts payable 
C)  Notes payable 
D)  Stockholders' equity 
A)  Net accounts receivable 
B)  Net accounts payable 
C)  Notes payable 
D)  Stockholders' equity

Question 2

The confirmatory bias is the tendency to use the data that is most readily available or most easily recalled to make a decision.

Accepted Answer

A) True 
 B)False

Question 3

In addition to disclosing judgments involving estimates and assumptions, ________ requires that companies disclose judgments made when determining appropriate accounting treatments for amounts reported on the financial statements.

Accepted Answer

A)  U.S. GAAP 
B)  IFRS 
C)  Both A & B 
D)  Neither A nor B 
A)  U.S. GAAP 
B)  IFRS 
C)  Both A & B 
D)  Neither A nor B

Question 4

Frank Reynolds is a controller researching an accounting issue and finds relevant information in an industry publication that prescribes a particular accounting treatment. Frank's research also reveals that the Codification indicates that a different approach is more appropriate. Which guidance should Frank follow and why?

Accepted Answer

In this case, Frank (and the e

Question 5

Complete the following table. Identify the bias indicated in the definition.
 $$\begin{array} { | l | l | } 
\hline \text { Definition } & \text { Cognitive Bias } \
\hline \text { In an attempt to avoid conflict, members reach a consensus without } & \
\text { considering all alternatives. } & \
\hline \text { The tendency to be more confident than your abilities and experience } \
\text { level would warrant. }\
\hline \text {One piece of information is weighted more heavily than other pieces}\
\text { when the decision maker focuses on just that data.}\
\hline \text {The tendency to use the most readily available or easily recalled data }\
 \text {to make a decision.}\
\hline \text {The decision maker under-weighs information that is inconsistent }\
 \text {with their initial beliefs.}\
\hline
\end{array}$$

Accepted Answer

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

Question 6

An example of a judgment in accounting for Accounts Receivable is ________.

Accepted Answer

A)  the percentage of credit sales that may be uncollectible 
B)  the amount a customer paid during the previous month 
C)  the decision whether to extend credit to a new customer 
D)  the percentage that may be deducted to calculate a sales discount 
A)  the percentage of credit sales that may be uncollectible 
B)  the amount a customer paid during the previous month 
C)  the decision whether to extend credit to a new customer 
D)  the percentage that may be deducted to calculate a sales discount

Question 7

Regina Woods, CPA is unsure about the presentation of one of the financial statements. In which topic grouping should she begin her research?

Accepted Answer

A)  1XX 
B)  2XX 
C)  3XX 
D)  4XX 
A)  1XX 
B)  2XX 
C)  3XX 
D)  4XX

Question 8

Being more confident than your abilities or experience level warrant is an example of ________.

Accepted Answer

A)  the overconfidence bias 
B)  the availability bias 
C)  the confirmatory bias 
D)  the anchoring bias 
A)  the overconfidence bias 
B)  the availability bias 
C)  the confirmatory bias 
D)  the anchoring bias

Question 9

In practice, accountants frequently use ________ to prepare and audit financial statements.

Accepted Answer

A)  clear-cut methods 
B)  judgment 
C)  strict rules 
D)  imagination 
A)  clear-cut methods 
B)  judgment 
C)  strict rules 
D)  imagination

Question 10

An example of a judgment in accounting for product warranties is ________.

Accepted Answer

A)  the items sold that are subject to warranty coverage 
B)  whether a product warranty should be for one year or two years 
C)  the cost of a specific replacement part 
D)  the amount of warranty expense to be accrued as a percent of sales 
A)  the items sold that are subject to warranty coverage 
B)  whether a product warranty should be for one year or two years 
C)  the cost of a specific replacement part 
D)  the amount of warranty expense to be accrued as a percent of sales

Question 11

In ASC 450-20-35-2, 2 represents the ________.

Accepted Answer

A)  topic 
B)  paragraph 
C)  section 
D)  subsection 
A)  topic 
B)  paragraph 
C)  section 
D)  subsection

Question 12

It is important to understand the facts of a transaction prior to conducting research because ________.

Accepted Answer

A)  it is necessary for documentation 
B)  misunderstood facts can lead to incorrect conclusions 
C)  it provides direction when searching the Codification 
D)  it is useful when comparing similar transactions 
A)  it is necessary for documentation 
B)  misunderstood facts can lead to incorrect conclusions 
C)  it provides direction when searching the Codification 
D)  it is useful when comparing similar transactions

Question 13

The accounting policies footnote would be a good place to look if you want to know ________.

Accepted Answer

A)  the inventory costing method used by a company 
B)  the depreciation method used by a company 
C)  the lives a company uses to depreciate plant assets 
D)  how the bad debt expense is estimated 
E)  All of the above 
A)  the inventory costing method used by a company 
B)  the depreciation method used by a company 
C)  the lives a company uses to depreciate plant assets 
D)  how the bad debt expense is estimated 
E)  All of the above

Question 14

Accountants undertake financial accounting research when a standard is unclear. Discuss why the standards may be unclear. Give at least one example.

Accepted Answer

Accounting standards may be unclear when

Question 15

Posing the question "Which method of depreciation should TNT Company use for their new equipment?" would most likely occur in which step of the financial accounting research process?

Accepted Answer

A)  Step 1 
B)  Step 2 
C)  Step 3 
D)  Step 4 
A)  Step 1 
B)  Step 2 
C)  Step 3 
D)  Step 4

Question 16

When evaluating research, you find that you need additional facts related to the business transaction. What should you do?

Accepted Answer

A)  Make a note of your questions, but continue on through the steps. 
B)  Return to step 2. 
C)  Return to step 1. 
D)  Ask for help; you clearly didn't pose the right question to begin with. 
A)  Make a note of your questions, but continue on through the steps. 
B)  Return to step 2. 
C)  Return to step 1. 
D)  Ask for help; you clearly didn't pose the right question to begin with.

Question 17

Riley Watson, lead salesperson for Bowman Industries, begins customer negotiations by proposing an unusually high price. Riley is hoping her customer will exhibit which cognitive bias in the negotiations?

Accepted Answer

A)  arrogance bias 
B)  overconfidence bias 
C)  anchoring bias 
D)  confirmatory bias 
A)  arrogance bias 
B)  overconfidence bias 
C)  anchoring bias 
D)  confirmatory bias

Question 18

Step 6 of the financial accounting research process involves ________.

Accepted Answer

A)  documenting the research process 
B)  communicating the results of the research process 
C)  comparing alternative treatments 
D)  Both A & B 
A)  documenting the research process 
B)  communicating the results of the research process 
C)  comparing alternative treatments 
D)  Both A & B

Question 19

The accounting policies footnote is ________.

Accepted Answer

A)  optional 
B)  required by U.S. GAAP 
C)  required by auditors 
D)  an internal management document 
A)  optional 
B)  required by U.S. GAAP 
C)  required by auditors 
D)  an internal management document

Question 20

The ________ is generally one of the first notes to the financial statements.

Accepted Answer

A)  accounting policies footnote 
B)  contingencies footnote 
C)  employee benefits footnote 
D)  intangibles explanation footnote 
A)  accounting policies footnote 
B)  contingencies footnote 
C)  employee benefits footnote 
D)  intangibles explanation footnote

Exam 3: Judgment and Applied Financial Accounting Research

Which of the following balances is most likely based on an estimate?

The confirmatory bias is the tendency to use the data that is most readily available or most easily recalled to make a decision.

In addition to disclosing judgments involving estimates and assumptions, ________ requires that companies disclose judgments made when determining appropriate accounting treatments for amounts reported on the financial statements.

An example of a judgment in accounting for Accounts Receivable is ________.

Regina Woods, CPA is unsure about the presentation of one of the financial statements. In which topic grouping should she begin her research?

Being more confident than your abilities or experience level warrant is an example of ________.

In practice, accountants frequently use ________ to prepare and audit financial statements.

An example of a judgment in accounting for product warranties is ________.

In ASC 450-20-35-2, 2 represents the ________.

It is important to understand the facts of a transaction prior to conducting research because ________.

The accounting policies footnote would be a good place to look if you want to know ________.

Accountants undertake financial accounting research when a standard is unclear. Discuss why the standards may be unclear. Give at least one example.

Posing the question "Which method of depreciation should TNT Company use for their new equipment?" would most likely occur in which step of the financial accounting research process?

When evaluating research, you find that you need additional facts related to the business transaction. What should you do?

Riley Watson, lead salesperson for Bowman Industries, begins customer negotiations by proposing an unusually high price. Riley is hoping her customer will exhibit which cognitive bias in the negotiations?

Step 6 of the financial accounting research process involves ________.

The accounting policies footnote is ________.

The ________ is generally one of the first notes to the financial statements.

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

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