Exam 1: An Introduction to Accounting Theory

The principal argument used to justify the replacement cost system over exit values is that if the great majority of the firm's assets were not already owned, it would be economically justifiable to acquire them.

A general price-level adjustment refers to the purchasing power of the monetary unitary unit relative to all goods and services in the economy.

Which of the following valuation methods is frequently referred to as a process of orderly liquidation?

Financial accounting refers to accounting information that is used by management for decision-making purposes.

Which of the following methods of valuing an asset is based on the amount that would be paid for it in markets where the asset would ordinarily be acquired?

Which of the following valuation approaches converts historical cost dollars by an index such as the Consumer Price Index?

Assessment measures are concerned with particular attributes of objects and are always direct measurements.

Which of the following valuation approaches has/have been defended as more suitable as a means for distributing income because it is not based on hypothetical opportunity cost figures?

Both exit value and replacement cost are valuation systems that fall into the current value category.

Which of the following refers to accounting information that is used by investors, creditors, and other outside parties for analyzing management performance and decision-making?

Accounting theory is developed and refined by the process of accounting research.

Explain how a firm might use a special purpose entity (SPE) to subvert the standard-setting process.

Calculations attempt to simulate or come as close as possible to the measurement of real phenomena or attributes.

For which measurement scale must the change in the attribute measured among assigned numbers be equal and the zero point imply the absence of the attribute measured?

Discuss the difference between direct measurement and indirect measurement. Give examples of each in an accounting context.

The use of which of the following types of measurement scales in accounting allows meaningful comparisons among similar accounting measurements for different firms?

There are often trade-offs between objectivity and the usefulness of numbers generated by the measurement process.

The discounted cash flow approach can be used to determine an objective measurement for most assets and liabilities.

Timeliness and cost are pertinent to assessment measures but are not pertinent to prediction measures.

Which of the following factors is not listed in your text as affecting a direct assessment measure?