Question 1

Revenue should not be recognized until:

Accepted Answer

A)  The earnings process is complete and collection is reasonably assured.
B)  Contracts have been signed and payment has been received.
C)  Work has been performed and customer has been billed.
D)  Collection has been made and warrantees have expired.E) None of the above
F) B) and D)

Question 2

Give an example of a violation of the stable monetary unit assumption. How would it affect the quality of financial statement information?

Accepted Answer

In a place or time in which a country ex...

Question 3

Financial accounting information should provide information about:

Accepted Answer

A)  Resources of an enterprise.
B)  Claims to resources.
C)  The effects of transactions that cause changes in resources.
D)  All of these.E) None of the above
F) A) and B)

Question 4

The recognition of which of the following expenses exemplifies the application of the matching principle?

Accepted Answer

A)  President's salary.
B)  Research and development.
C)  Cost of goods sold.
D)  Advertising.E) A) and C)
F) All of the above

Question 5

The Public Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) changed the entity responsible for setting auditing standards in the United States.

Accepted Answer

A) True 
 B)False

Question 6

Auditors play an important role in the resource allocation process by adding credibility to financial statements.

Accepted Answer

A) True 
 B)False

Question 7

The FASB issues a Statement of Accounting Standards if _________ FASB members support it.

Accepted Answer

A)  5 of 9
B)  5 of 7
C)  4 of 7
D)  None of these is correct.E) A) and C)
F) A) and D)

Question 8

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

Accepted Answer

Balance sheet, Incom...

Question 9

When a registrant company submits its annual filing to the SEC, it uses:

Accepted Answer

A)  Form 10-A.
B)  Form 10-K.
C)  Form 10-Q.
D)  Form S-1.E) All of the above
F) A) and B)

Question 10

Which of the following groups is not among the external users for whom financial statements are prepared?

Accepted Answer

A)  Customers
B)  Suppliers
C)  Employees
D)  All of these are external users of financial statements.E) None of the above
F) All of the above

Question 11

The primary historical reason for the FASB reversing its positions when political pressures occur is:

Accepted Answer

A)  The cost gathering data was prohibitive.
B)  The difficulties in measurement were too great.
C)  They have no authority in such situations.
D)  The SEC did not support the FASB position.E) B) and C)
F) A) and D)

Question 12

If an independent auditing firm expresses dissatisfaction with a company's financial statements, it issues:

Accepted Answer

A)  A qualified opinion.
B)  An unqualified opinion.
C)  A disqualified opinion.
D)  A rejection of opinion.E) A) and B)
F) All of the above

Question 13

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 workpapers.
D)  All of these are provisions of the Act.E) A) and B)
F) A) and C)

Question 14

External decision makers would not look primarily to financial accounting information to assist them in making decisions on:

Accepted Answer

A)  Granting credit.
B)  Capital budgeting.
C)  Selecting stocks.
D)  Mergers and acquisitions.E) B) and D)
F) None of the above

Question 15

Under federal securities laws, the SEC has the authority to set accounting standards in the U.S.

Accepted Answer

A) True 
 B)False

Question 16

The main issue in the debate over accounting for employee stock options was:

Accepted Answer

A)  Which employees should receive options.
B)  The amount of compensation expense that a company should recognize.
C)  How many options should be granted to key executives.
D)  The tax consequences of employee stock options.E) A) and C)
F) C) and D)

Question 17

How does the value of an audit affect financial statements?

Accepted Answer

Outside auditors add credibility to fina...

Question 18

Of the following, the most important objective for financial reporting is to provide information useful for:

Accepted Answer

A)  Predicting cash flows.
B)  Determining taxable income.
C)  Providing accountability.
D)  Increasing future profits.E) B) and C)
F) A) and B)

Question 19

The FASB's standard-setting process includes, in the correct order:

Accepted Answer

A)  Exposure draft, research, discussion memorandum, SFAS.
B)  Research, exposure draft, discussion memorandum, SFAS.
C)  Research, discussion memorandum, exposure draft, SFAS.
D)  Discussion memorandum, research, exposure draft, SFAS.E) C) and D)
F) B) and D)

Question 20

Which of the following best demonstrates the full disclosure principle:

Accepted Answer

A)  The multi-step income statement.
B)  The auditors' report.
C)  The company's tax return.
D)  Disclosure notes to financial statements.E) A) and D)
F) A) and B)

Exam 1: Environment and Theoretical Structure of Financial Accounting

The main issue in the debate over accounting for employee stock options was:

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Which of the following best demonstrates the full disclosure principle:

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If an independent auditing firm expresses dissatisfaction with a company's financial statements, it issues:

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Revenue should not be recognized until:

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

Correct AnswerverifiedShow Answer

When a registrant company submits its annual filing to the SEC, it uses:

Correct AnswerverifiedShow Answer

The FASB issues a Statement of Accounting Standards if _________ FASB members support it.

Correct AnswerverifiedShow Answer

Financial accounting information should provide information about:

Correct AnswerverifiedShow Answer

The Public Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) changed the entity responsible for setting auditing standards in the United States.

Correct AnswerverifiedShow Answer

The recognition of which of the following expenses exemplifies the application of the matching principle?

Correct AnswerverifiedShow Answer

Which of the following groups is not among the external users for whom financial statements are prepared?

Correct AnswerverifiedShow Answer

How does the value of an audit affect financial statements?

Correct AnswerverifiedOutside auditors add credibility to fina...View AnswerShow Answer

The primary historical reason for the FASB reversing its positions when political pressures occur is:

Correct AnswerverifiedShow Answer

Auditors play an important role in the resource allocation process by adding credibility to financial statements.

Correct AnswerverifiedShow Answer

The FASB's standard-setting process includes, in the correct order:

Correct AnswerverifiedShow Answer

Under federal securities laws, the SEC has the authority to set accounting standards in the U.S.

Correct AnswerverifiedShow Answer

External decision makers would not look primarily to financial accounting information to assist them in making decisions on:

Correct AnswerverifiedShow Answer

Give an example of a violation of the stable monetary unit assumption. How would it affect the quality of financial statement information?

Correct AnswerverifiedIn a place or time in which a country ex...View AnswerShow Answer

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

Correct AnswerverifiedBalance sheet, Incom...View AnswerShow Answer

Of the following, the most important objective for financial reporting is to provide information useful for:

Correct AnswerverifiedShow Answer

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Outside auditors add credibility to fina...
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In a place or time in which a country ex...
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Balance sheet, Incom...
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Correct Answer
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