Question 1

The Statements of Financial Accounting Concepts are intended to provide the Financial Accounting Standards Board with a common foundation and the basic underlying reasoning on which to consider the merits of various alternative accounting principles.

Accepted Answer

A) True 
 B)False

Question 2

Match the letter of each phrase with the appropriate definition.
-Responsible for adopting auditing standards.

Accepted Answer

A) Generally Accepted Accounting Principles (GAAP) 
B) Securities and Exchange Commission (SE
C)  
C) American Institute of Certified Public Accountants (AICP
A)  
D) Accounting Principles Board (AP
B)  
E) Financial Accounting Standards Board (FAS
B) 
F)Statements of Financial Standards (SFAS)
G)Discussion Memorandum (DM)
H)Statements of Position (SOP)
I)Emerging Issues Task Force (EITF)
J)Financial Reporting Releases (FRRs)
K)The Public Company Accounting Oversight Board (PCAO
B)

Question 3

Accountants face a problem of when to recognize revenue.Which of the following methods of recognizing revenue is not used in practice?

Accepted Answer

A) Point of sale 
B) Point of order acceptance 
C) End of production 
D) Receipt of cash 
E) Revenue recognized during production

Question 4

Accountants normally recognize revenue when cash is received.

Accepted Answer

A) True 
 B)False

Question 5

Understating expenses is justified based on:

Accepted Answer

A) time period assumption. 
B) conservatism assumption. 
C) materiality assumption. 
D) matching assumption. 
E) None of the answers are correct.

Question 6

The following data relate to Rocket Company for the year ended December 31, 2012.Rocket Company uses the cash basis. $$\begin{array} { l r } 
\text { Sales on credit } & \$ 180,000 \
\text { Cost of inventory sold on credit } & 130,000 \
\text { Collections from customers } & 170,000 \
\text { Purchase of inventory on credit } & 140,000 \
\text { Payment for purchases } & 150,000 \
\text { Selling expenses (accrual basis) } & 20,000 \
\text { Payment for selling expenses } & 25,000
\end{array}$$ Which of the following amounts represents income for Rocket Company for the year ended December 31, 2012?

Accepted Answer

A) $30,000 
B) $5,000 loss 
C) $40,000 
D) $45,000 
E) $50,000

Question 7

Reasonable inaccuracies of accounting for an entity, short of its complete life span, are accepted.

Accepted Answer

A) True 
 B)False

Question 8

The business being separate and distinct from the owners is an integral part of the:

Accepted Answer

A) time period assumption. 
B) going concern assumption. 
C) business entity assumption. 
D) realization assumption. 
E) None of the answers are correct.

Question 9

Which of the following does not relate to The Public Company Accounting Oversight Board (PCAOB)?

Accepted Answer

A) Two members of the board must be CPAs. 
B) In addition to appointing the five members of the PCAOB, the SEC is responsible for the oversight and enforcement authority over the Board. 
C) The PCAOB consists of five members appointed by the SEC. 
D) The PCAOB is to adopt auditing standards. 
E) The PCAOB is to adopt accounting standards.

Question 10

Match the letter of each phrase with the appropriate definition.
-A task force of representatives from the accounting profession created by the FASB to deal with emerging issues of financial reporting.

Accepted Answer

A) Generally Accepted Accounting Principles (GAAP) 
B) Securities and Exchange Commission (SE
C)  
C) American Institute of Certified Public Accountants (AICP
A)  
D) Accounting Principles Board (AP
B)  
E) Financial Accounting Standards Board (FAS
B) 
F)Statements of Financial Standards (SFAS)
G)Discussion Memorandum (DM)
H)Statements of Position (SOP)
I)Emerging Issues Task Force (EITF)
J)Financial Reporting Releases (FRRs)
K)The Public Company Accounting Oversight Board (PCAO
B)

Question 11

Which of these measurement attributes is not currently used in practice?

Accepted Answer

A) Historical cost 
B) Relevant cost 
C) Current market value 
D) Current cost 
E) Present value

Question 12

By law, the setting of accounting standards is the responsibility of the:

Accepted Answer

A) AICPA Committee on Accounting Procedure. 
B) New York Stock Exchange. 
C) Accounting Principles Board. 
D) Securities and Exchange Commission. 
E) Financial Accounting Standards Board.

Question 13

Match the letter of each Concept Statement with the Concept Statement title.
-Elements of Financial Statements (a replacement of No.3)

Accepted Answer

A) Statement of Financial Accounting Concepts No.1 
B) Statement of Financial Accounting Concepts No.2 
C) Statement of Financial Accounting Concepts No.3 
D) Statement of Financial Accounting Concepts No.4 
E) Statement of Financial Accounting Concepts No.5
F)Statement of Financial Accounting Concepts No.6
G)Statement of Financial Accounting Concepts No.7

Question 14

Using the business entity assumption, the financial statements are prepared separate and distinct from the owners of the entity.

Accepted Answer

A) True 
 B)False

Question 15

Accountants provide for inflation using which of the following accounting principles?

Accepted Answer

A) Going concern 
B) Time period 
C) Conservatism 
D) Materiality 
E) None of the answers are correct.

Exam 1: Introduction to Financial Reporting

The Statements of Financial Accounting Concepts are intended to provide the Financial Accounting Standards Board with a common foundation and the basic underlying reasoning on which to consider the merits of various alternative accounting principles.

Match the letter of each phrase with the appropriate definition. -Responsible for adopting auditing standards.

Accountants face a problem of when to recognize revenue.Which of the following methods of recognizing revenue is not used in practice?

Accountants normally recognize revenue when cash is received.

Understating expenses is justified based on:

Reasonable inaccuracies of accounting for an entity, short of its complete life span, are accepted.

The business being separate and distinct from the owners is an integral part of the:

Which of the following does not relate to The Public Company Accounting Oversight Board (PCAOB) ?

Match the letter of each phrase with the appropriate definition. -A task force of representatives from the accounting profession created by the FASB to deal with emerging issues of financial reporting.

Which of these measurement attributes is not currently used in practice?

By law, the setting of accounting standards is the responsibility of the:

Match the letter of each Concept Statement with the Concept Statement title. -Elements of Financial Statements (a replacement of No.3)

Using the business entity assumption, the financial statements are prepared separate and distinct from the owners of the entity.

Accountants provide for inflation using which of the following accounting principles?