Question 1

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 the above are external users of financial statements.E) B) and C)
F) B) and D)

Question 2

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

Accepted Answer

A)  SFAC 4.
B)  SFAC 3.
C)  SFAC 5.
D)  SFAC 6.E) All of the above
F) A) and C)

Question 3

The FASB issues accounting standards in the form of:

Accepted Answer

A)  Accounting Research Bulletins.
B)  Accounting Standards Updates.
C)  Financial Accounting Standards.
D)  Financial Technical Bulletins.E) A) and D)
F) None of the above

Question 4

Which of the following does not apply to secondary markets?

Accepted Answer

A)  Transactions are important to the efficient allocation of resources in our economy.
B)  New resources are provided when shares of stock are sold by the corporation to the initial owners.
C)  Transactions help to establish market prices for additional shares that may be issued in the future.
D)  Many investors might be unwilling to provide resources to corporations if there is no available mechanism for the future sale of their stocks and bonds to others.E) All of the above
F) A) and D)

Question 5

Corporations issue their shares to the investing public in the:

Accepted Answer

A)  Option a
B)  Option b
C)  Option c
D)  Option dE) B) and C)
F) A) and C)

Question 6

The monetary unit assumption requires that items in financial statements be measured in a particular monetary unit.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

These amounts are different because of t...

Question 8

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

Accepted Answer

In order to provide consistency, a conce...

Question 9

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) None of the above
F) A) and C)

Question 10

Under IFRS, the conceptual framework:

Accepted Answer

A)  Emphasizes the overarching concept of the financial statements providing a "true and fair representation" of the company.
B)  Is not designed to provide guidance to standard setters, but rather only to practitioners.
C)  Is not designed to provide guidance to practitioners, but rather only to standard setters.
D)  Specifies a set of rules that determine what constitutes a true IFRS standard.E) A) and B)
F) B) and C)

Question 11

Briefly describe how materiality is featured in the conceptual framework.

Accepted Answer

Materiality-Information is material if i...

Question 12

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 13

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.E) None of the above
F) All of the above

Question 14

Accounting standard setting has been characterized as a political process. Discuss this proposition giving an example.

Accepted Answer

Changes in GAAP can have significant dif...

Question 15

The matching principle is:

Accepted Answer

A)  A valuation method.
B)  An expense recognition accounting principle.
C)  A cash basis reporting principle.
D)  An asset classification procedure.E) A) and B)
F) A) and C)

Question 16

The conceptual framework's recognition and measurement concepts recognize which of the following as an assumption, rather than a principle?

Accepted Answer

A)  Going concern.
B)  Historical cost.
C)  Full disclosure.
D)  Realization.E) C) and D)
F) None of the above

Question 17

Under IFRS, the role of the conceptual framework:

Accepted Answer

A)  Primarily involves guiding standard setters to make sure that standards are consistent with each other.
B)  Includes serving as a guide for practitioners when a specific standard does not apply.
C)  Is less important than in U.S.GAAP.
D)  Has resulted primarily from a convergence with U.S.GAAP.E) A) and C)
F) A) and D)

Question 18

Accounting for stock-based compensation is an area in which the FASB has received little political interference.

Accepted Answer

A) True 
 B)False

Question 19

Compute the cash balance at the end of the first year for Alpaca Corporation.

Accepted Answer

The answer of Compute the cash balance at the end...

Question 20

Mega Loan Company has very stringent credit requirements and, accordingly, has negligible losses from uncollectible accounts. The company's independent accountants did not protest when, contrary to GAAP, the company recorded bad debt expense only when specific accounts were determined to be uncollectible, rather than use an allowance for uncollectible accounts. The concept demonstrated is:

Accepted Answer

A)  Comparability.
B)  Faithful representation.
C)  Cost-effectiveness.
D)  Materiality.E) A) and B)
F) B) and C)

Exam 1: Environment and Theoretical Structure of Financial Accounting

The monetary unit assumption requires that items in financial statements be measured in a particular monetary unit.

Correct Answer
verified

An important argument in support of historical cost information is:

Correct Answer
verified

Which of the following does not apply to secondary markets?

Correct Answer
verified

The FASB issues accounting standards in the form of:

Correct Answer
verified

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

Correct Answer
verified
a. Quoted market prices in active market...
View Answer

Accounting for stock-based compensation is an area in which the FASB has received little political interference.

Correct Answer
verified

Corporations issue their shares to the investing public in the:

Correct Answer
verified

The conceptual framework's recognition and measurement concepts recognize which of the following as an assumption, rather than a principle?

Correct Answer
verified

Under IFRS, the conceptual framework:

Correct Answer
verified

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

Correct Answer
verified

Briefly describe how materiality is featured in the conceptual framework.

Correct Answer
verified
Materiality-Information is material if i...
View Answer

Correct Answer
verified

Accounting standard setting has been characterized as a political process. Discuss this proposition giving an example.

Correct Answer
verified
Changes in GAAP can have significant dif...
View Answer

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

Correct Answer
verified

The matching principle is:

Correct Answer
verified

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

Correct Answer
verified
In order to provide consistency, a conce...
View Answer

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

Correct Answer
verified

Under IFRS, the role of the conceptual framework:

Correct Answer
verified

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

Correct Answer
verified
These amounts are different because of t...
View Answer

Compute the cash balance at the end of the first year for Alpaca Corporation.

Correct Answer
verified

Exam 1: Environment and Theoretical Structure of Financial Accounting

The monetary unit assumption requires that items in financial statements be measured in a particular monetary unit.

Correct AnswerverifiedShow Answer

An important argument in support of historical cost information is:

Correct AnswerverifiedShow Answer

Which of the following does not apply to secondary markets?

Correct AnswerverifiedShow Answer

The FASB issues accounting standards in the form of:

Correct AnswerverifiedShow Answer

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

Correct Answerverifieda. Quoted market prices in active market...View AnswerShow Answer

Accounting for stock-based compensation is an area in which the FASB has received little political interference.

Correct AnswerverifiedShow Answer

Corporations issue their shares to the investing public in the:

Correct AnswerverifiedShow Answer

The conceptual framework's recognition and measurement concepts recognize which of the following as an assumption, rather than a principle?

Correct AnswerverifiedShow Answer

Under IFRS, the conceptual framework:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Briefly describe how materiality is featured in the conceptual framework.

Correct AnswerverifiedMateriality-Information is material if i...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Accounting standard setting has been characterized as a political process. Discuss this proposition giving an example.

Correct AnswerverifiedChanges in GAAP can have significant dif...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The matching principle is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedIn order to provide consistency, a conce...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Under IFRS, the role of the conceptual framework:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThese amounts are different because of t...View AnswerShow Answer

Compute the cash balance at the end of the first year for Alpaca Corporation.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. Quoted market prices in active market...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Materiality-Information is material if i...
View Answer

Correct Answer
verified

Correct Answer
verified
Changes in GAAP can have significant dif...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In order to provide consistency, a conce...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
These amounts are different because of t...
View Answer

Correct Answer
verified