Question 1

Which of the following does not relate to relevance?

Accepted Answer

A)  Materiality 
B)  Predictive value 
C)  Confirmatory value 
D)  All of these answer choices relate to relevance. 
A)  Materiality 
B)  Predictive value 
C)  Confirmatory value 
D)  All of these answer choices relate to relevance.

Question 2

The accounting principle of expense recognition is best demonstrated by

Accepted Answer

A)  not recognizing any expense unless some revenue is realized. 
B)  associating effort (expense) with accomplishment (revenue). 
C)  recognizing prepaid rent received as revenue. 
D)  establishing an Appropriation for Contingencies account. 
A)  not recognizing any expense unless some revenue is realized. 
B)  associating effort (expense) with accomplishment (revenue). 
C)  recognizing prepaid rent received as revenue. 
D)  establishing an Appropriation for Contingencies account.

Question 3

The IASB is considering a proposal to provide expanded guidance on estimating fair values.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not a basic element of financial statements?

Accepted Answer

A)  Assets. 
B)  Balance sheet. 
C)  Losses. 
D)  Revenue. 
A)  Assets. 
B)  Balance sheet. 
C)  Losses. 
D)  Revenue.

Question 5

Which of the following is an application of the principle of rational and systematic allocation?

Accepted Answer

A)  Amortization of intangible assets. 
B)  Sales commissions. 
C)  Research and development costs. 
D)  Officers' salaries. 
A)  Amortization of intangible assets. 
B)  Sales commissions. 
C)  Research and development costs. 
D)  Officers' salaries.

Question 6

The characteristic that is demonstrated when a high degree of consensus can be secured among independent measurers using the same measurement methods is

Accepted Answer

A)  relevance. 
B)  faithful representation. 
C)  verifiability. 
D)  neutrality. 
A)  relevance. 
B)  faithful representation. 
C)  verifiability. 
D)  neutrality.

Question 7

The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts, is an application of the

Accepted Answer

A)  consistency characteristic. 
B)  expense recognition principle. 
C)  materiality quality. 
D)  revenue recognition principle. 
A)  consistency characteristic. 
B)  expense recognition principle. 
C)  materiality quality. 
D)  revenue recognition principle.

Question 8

Which of the following is an argument against using historical cost in accounting?

Accepted Answer

A)  Fair values are more relevant. 
B)  Historical costs are based on an exchange transaction. 
C)  Historical costs are reliable. 
D)  Fair values are subjective. 
A)  Fair values are more relevant. 
B)  Historical costs are based on an exchange transaction. 
C)  Historical costs are reliable. 
D)  Fair values are subjective.

Question 9

Financial information exhibits the characteristic of consistency when

Accepted Answer

A)  expenses are reported as charges against revenue in the period in which they are paid. 
B)  a company applies the same accounting treatment to similar events, from period to period. 
C)  extraordinary gains and losses are not included on the income statement. 
D)  accounting procedures are adopted which give a consistent rate of net income. 
A)  expenses are reported as charges against revenue in the period in which they are paid. 
B)  a company applies the same accounting treatment to similar events, from period to period. 
C)  extraordinary gains and losses are not included on the income statement. 
D)  accounting procedures are adopted which give a consistent rate of net income.

Question 10

Which basic assumption may not be followed when a firm in bankruptcy reports financial results?

Accepted Answer

A)  Economic entity assumption. 
B)  Going concern assumption. 
C)  Periodicity assumption. 
D)  Monetary unit assumption. 
A)  Economic entity assumption. 
B)  Going concern assumption. 
C)  Periodicity assumption. 
D)  Monetary unit assumption.

Question 11

Revenue generally should be recognized

Accepted Answer

A)  at the end of production. 
B)  at the time of cash collection. 
C)  when realized. 
D)  when the performance obligation is satisfied. 
A)  at the end of production. 
B)  at the time of cash collection. 
C)  when realized. 
D)  when the performance obligation is satisfied.

Question 12

A conceptual framework is a coherent system of concepts that flow from an objective.

Accepted Answer

A) True 
 B)False

Question 13

The objective of general-purpose financial reporting is to provide financial information about a reporting entity to each of the following except

Accepted Answer

A)  potential equity investors. 
B)  potential lenders. 
C)  present investors. 
D)  All of these answers are correct. 
A)  potential equity investors. 
B)  potential lenders. 
C)  present investors. 
D)  All of these answers are correct.

Question 14

Which of the following is considered a pervasive constraint by Statement of Financial Accounting Concepts No. 8?

Accepted Answer

A)  Conservatism 
B)  Timeliness 
C)  Verifiability 
D)  Cost-constraint 
A)  Conservatism 
B)  Timeliness 
C)  Verifiability 
D)  Cost-constraint

Question 15

Which of the following is a primary quality of useful accounting information?

Accepted Answer

A)  Conservatism. 
B)  Comparability. 
C)  Faithful representation. 
D)  Consistency. 
A)  Conservatism. 
B)  Comparability. 
C)  Faithful representation. 
D)  Consistency.

Question 16

Which of the following elements of financial statements is not a component of comprehensive income?

Accepted Answer

A)  Revenues 
B)  Distributions to owners 
C)  Losses 
D)  Expenses 
A)  Revenues 
B)  Distributions to owners 
C)  Losses 
D)  Expenses

Question 17

Which basic element of financial statements arises from peripheral or incidental transactions?

Accepted Answer

A)  Assets. 
B)  Liabilities. 
C)  Gains. 
D)  Expenses. 
A)  Assets. 
B)  Liabilities. 
C)  Gains. 
D)  Expenses.

Question 18

What is meant by comparability when discussing financial accounting information?

Accepted Answer

A)  Information has predictive or confirmatory value. 
B)  Information is reasonably free from error. 
C)  Information that is measured and reported in a similar fashion across companies. 
D)  Information is timely. 
A)  Information has predictive or confirmatory value. 
B)  Information is reasonably free from error. 
C)  Information that is measured and reported in a similar fashion across companies. 
D)  Information is timely.

Question 19

The two fundamental qualities that make accounting information useful for decision making are

Accepted Answer

A)  comparability and timeliness. 
B)  materiality and neutrality. 
C)  relevance and faithful representation. 
D)  faithful representation and comparability. 
A)  comparability and timeliness. 
B)  materiality and neutrality. 
C)  relevance and faithful representation. 
D)  faithful representation and comparability.

Question 20

Accounting concepts-identification.
Presented below are a number of accounting procedures and practices in Ramirez Corp. For each of these items, list the assumption, principle, information characteristic, or modifying convention that is violated.
1. Because the company's income is low this year, a switch from accelerated depreciation to straight-line depreciation is made this year.
2. The president of Ramirez Corp. believes it is foolish to report financial information on a yearly basis. Instead, the president believes that financial information should be disclosed only when significant new information is available related to the company's operations.
3. Ramirez Corp. decides to establish a large loss and related liability this year because of the possibility that it may lose a pending patent infringement lawsuit. The possibility of loss is considered remote by its attorneys.
4. An officer of Ramirez Corp. purchased a new home computer for personal use with company money, charging miscellaneous expense.
5. A machine, that cost $40,000, is reported at its current market value of $45,000.

Accepted Answer

1. Consistency.
2. Periodicity.
3. Expen

Exam 2: Conceptual Framework for Financial Reporting

Which of the following does not relate to relevance?

The accounting principle of expense recognition is best demonstrated by

The IASB is considering a proposal to provide expanded guidance on estimating fair values.

Which of the following is not a basic element of financial statements?

Which of the following is an application of the principle of rational and systematic allocation?

The characteristic that is demonstrated when a high degree of consensus can be secured among independent measurers using the same measurement methods is

The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts, is an application of the

Which of the following is an argument against using historical cost in accounting?

Financial information exhibits the characteristic of consistency when

Which basic assumption may not be followed when a firm in bankruptcy reports financial results?

Revenue generally should be recognized

A conceptual framework is a coherent system of concepts that flow from an objective.

The objective of general-purpose financial reporting is to provide financial information about a reporting entity to each of the following except

Which of the following is considered a pervasive constraint by Statement of Financial Accounting Concepts No. 8?

Which of the following is a primary quality of useful accounting information?

Which of the following elements of financial statements is not a component of comprehensive income?

Which basic element of financial statements arises from peripheral or incidental transactions?

What is meant by comparability when discussing financial accounting information?

The two fundamental qualities that make accounting information useful for decision making are

Financial Accounting and Accounting Standards

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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