Question 1

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

Question 2

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. 
A) Realization principle. 
B) Historical cost principle. 
C) Matching principle. 
D) Going concern assumption. C

Question 3

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. 
A) Fairness of financial statements. 
B) Accuracy of financial statements. 
C) Soundness of a company's future. 
D) Quality of a company's management. A

Question 4

Constraints on qualitative characteristics of accounting information include:

Accepted Answer

A) Timeliness. 
B) Going concern. 
C) Neutrality. 
D) Conservatism. 
A) Timeliness. 
B) Going concern. 
C) Neutrality. 
D) Conservatism.

Question 5

According to the conceptual framework, verifiability implies:

Accepted Answer

A) Legal evidence. 
B) Logic. 
C) Consensus. 
D) Legal verdict. 
A) Legal evidence. 
B) Logic. 
C) Consensus. 
D) Legal verdict.

Question 6

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 7

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. 
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.

Question 8

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 principle 
A) Conservatism 
B) The matching principle 
C) Realization principle 
D) Full disclosure principle

Question 9

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

Question 10

Which of the following groups is not among financial intermediaries?

Accepted Answer

A) Mutual fund managers 
B) Financial analysts 
C) CPAs 
D) Credit rating organizations 
A) Mutual fund managers 
B) Financial analysts 
C) CPAs 
D) Credit rating organizations

Question 11

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 6 
A) SFAC 1 
B) SFAC 2 
C) SFAC 5 
D) SFAC 6

Question 12

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

Accepted Answer

Economic entity - All economic events ca

Question 13

Conservatism is a desired qualitative characteristic of accounting information.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Question 16

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

Question 17

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 18

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. 
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.

Question 19

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. 
A) Relevance and comparability. 
B) Comparability and consistency. 
C) Reliability and relevance. 
D) Reliability and consistency.

Question 20

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. 
A) Its conceptual framework. 
B) Its code of ethics. 
C) Federal laws. 
D) State laws.

Exam 1: Environment and Theoretical Structure of Financial Accounting

SFAC No.1 focuses on:

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

Independent auditors express an opinion on the:

Constraints on qualitative characteristics of accounting information include:

According to the conceptual framework, verifiability implies:

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

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

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:

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

Which of the following groups is not among financial intermediaries?

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

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

Conservatism is a desired qualitative characteristic of accounting information.

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?

GAAP is an abbreviation for:

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

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

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

Primary qualitative characteristics of accounting information are:

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:

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Operational Assets: Acquisition and Disposition

Operational Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

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