Question 1

An important argument in support of historical cost information is:

Accepted Answer

A)  Relevance. 
B)  Predictive quality for future cash flows. 
C)  Materiality. 
D)  Verifiability. 
A)  Relevance. 
B)  Predictive quality for future cash flows. 
C)  Materiality. 
D)  Verifiability. D

Question 2

The FASB's conceptual framework's qualitative characteristics of accounting information include:

Accepted Answer

A)  Historical cost. 
B)  Realization. 
C)  Faithful representation. 
D)  Full disclosure. 
A)  Historical cost. 
B)  Realization. 
C)  Faithful representation. 
D)  Full disclosure. C

Question 3

The FASB's framework for measuring fair value doesn't change the situations in which fair value is used under current GAAP.

Accepted Answer

A) True 
 B)False  True

Question 4

If a company has declared bankruptcy, its financial statements likely violate:

Accepted Answer

A)  The fair value measurement approach. 
B)  The present value measurement approach. 
C)  The stable monetary unit assumption. 
D)  The going concern assumption. 
A)  The fair value measurement approach. 
B)  The present value measurement approach. 
C)  The stable monetary unit assumption. 
D)  The going concern assumption.

Question 5

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 these answer choices are correct. 
A)  Corporate executive accountability. 
B)  Auditor rotation. 
C)  Retention of work papers. 
D)  All of these answer choices are correct.

Question 6

Net income equals:

Accepted Answer

A)  Assets minus liabilities. 
B)  Revenues minus cost of goods sold. 
C)  Revenues minus expenses. 
D)  Cash receipts minus cash payments. 
A)  Assets minus liabilities. 
B)  Revenues minus cost of goods sold. 
C)  Revenues minus expenses. 
D)  Cash receipts minus cash payments.

Question 7

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Periodicity assumption

Accepted Answer

A) Implies consensus among different observers. 
B) Assumes an entity will continue to operate indefinitely. 
C) Ignores the possibility of inflation. 
D) Assumes all transactions can be identified with a particular entity. 
E) Requires reporting the financial life of an entity in discrete time frames. 
A) Implies consensus among different observers. 
B) Assumes an entity will continue to operate indefinitely. 
C) Ignores the possibility of inflation. 
D) Assumes all transactions can be identified with a particular entity. 
E) Requires reporting the financial life of an entity in discrete time frames.

Question 8

List and briefly describe the three levels of inputs described in the fair-value measurement hierarchy.

Accepted Answer

a. Quoted market prices in active market

Question 9

The FASB is currently the public-sector organization responsible for setting accounting standards in the United States.

Accepted Answer

A) True 
 B)False

Question 10

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term.
-Completeness

Accepted Answer

A) The change in equity from nonowner transactions. 
B) Contains all information necessary for faithful representation. 
C) Along with relevance, a fundamental decision-specific quality. 
D) Results if an asset is sold for more than book value. 
E) Concerns the decision-making impact of both the amount and nature of an item. 
A) The change in equity from nonowner transactions. 
B) Contains all information necessary for faithful representation. 
C) Along with relevance, a fundamental decision-specific quality. 
D) Results if an asset is sold for more than book value. 
E) Concerns the decision-making impact of both the amount and nature of an item.

Question 11

Materiality can be affected by the dollar amount of an item, the nature of the item, or both.

Accepted Answer

A) True 
 B)False

Question 12

Disclosure notes to a company's financial statements:

Accepted Answer

A)  Are relatively unimportant facts that don't belong in the basic financial statements. 
B)  Document the source of financial statement facts, like literary footnotes. 
C)  Are an integral part of a company's financial statements. 
D)  Are irrelevant facts that are immaterial in amount. 
A)  Are relatively unimportant facts that don't belong in the basic financial statements. 
B)  Document the source of financial statement facts, like literary footnotes. 
C)  Are an integral part of a company's financial statements. 
D)  Are irrelevant facts that are immaterial in amount.

Question 13

-Compute Amazon's balance in cash at the beginning of the year.

Accepted Answer

Beginning balance in Cash + Ne

Question 14

Accounting standard-setting has been characterized as:

Accepted Answer

A)  A political process. 
B)  Using the scientific method. 
C)  Pure deductive reasoning. 
D)  Pure inductive reasoning. 
A)  A political process. 
B)  Using the scientific method. 
C)  Pure deductive reasoning. 
D)  Pure inductive reasoning.

Question 15

Over time, accounting standards have developed to reflect changes in the business world as well as changes in our ability to account for such changes. Using the example of marking assets and liabilities to their fair value, explain why you would expect accounting standards to change.

Accepted Answer

Historically, financial accounting relie

Question 16

List the four financial statements most frequently provided to external users.

Accepted Answer

Balance sheet, Incom

Question 17

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

Question 18

The periodicity assumption requires that present value calculations take into account the number of compounding periods in each year.

Accepted Answer

A) True 
 B)False

Question 19

Comprehensive income is another term for net income.

Accepted Answer

A) True 
 B)False

Question 20

Identify or define the following term: historical cost.

Accepted Answer

Historical cost-A measu

Exam 1: Environment and Theoretical Structure of Financial Accounting

An important argument in support of historical cost information is:

The FASB's conceptual framework's qualitative characteristics of accounting information include:

The FASB's framework for measuring fair value doesn't change the situations in which fair value is used under current GAAP.

If a company has declared bankruptcy, its financial statements likely violate:

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

Net income equals:

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Periodicity assumption

List and briefly describe the three levels of inputs described in the fair-value measurement hierarchy.

The FASB is currently the public-sector organization responsible for setting accounting standards in the United States.

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Completeness

Materiality can be affected by the dollar amount of an item, the nature of the item, or both.

Disclosure notes to a company's financial statements:

-Compute Amazon's balance in cash at the beginning of the year.

Accounting standard-setting has been characterized as:

Over time, accounting standards have developed to reflect changes in the business world as well as changes in our ability to account for such changes. Using the example of marking assets and liabilities to their fair value, explain why you would expect accounting standards to change.

List the four financial statements most frequently provided to external users.

SFAC No.5 focuses on:

The periodicity assumption requires that present value calculations take into account the number of compounding periods in each year.

Comprehensive income is another term for net income.

Identify or define the following term: historical cost.

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Revenue Recognition

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Property, Plant, and Equipment and Intangible Assets: Acquisition

Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

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 and Error Corrections

The Statement of Cash Flows Revisited

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