Intermediate Accounting Chapter 1 Quiz

The accounting equations is A. Assets - Liabilities = Shareholders' equity B. Assets = Liabilities - Shareholders' Equity C. Assets + Liabilities = Shareholders' Equity D. Assets + Shareholders' Equity = Liabilities

A. Assets - Liabilities = Shareholders' Equity

What is the responsibility of the International Accounting Standards Board? A. IASB promotes uniform accounting standards among different countries B. ISAB is to develop a uniform currency in which the financial transactions would be measured C. IASB settles accounting disputes between auditors and international companies D. IASB issues standards which regulate the financial accounting and reporting of multinational corporations and then enforces them through legal channels

A. IASB promotes uniform accounting standards among different countries

Which of the following is NOT a major standard-setting body responsible for the establishment of US and International Financial Reporting Standards? A. PCAOB (Public Company Accounting Oversight Board) B. FASB C. IASB D. SEC

A. PCAOB

After formulating a strategic plan, a company will engage in what three types of activities? A. financing, investing, and operating B. operating, planning, and financing C. planning, operating, and selling D. investing, operating, and selling

A. financing, investing, and operating

Which formally the SEC is charge with the responsibility for establishing accounting principles to be followed in the preparation of SEC filings, the impact of the SEC general has been A. in its informal review and approval of standards developed in the private sector prior to their release B. ineffective in controlling foreign corporations and investors C. in guiding the development of stock exchanges D. in its assistance to Congress with the development of tax law

A. in its informal review and approval of standards developed in the private sector prior to their release

The four major financial statements of a corporation consist of the A. income statement, balance sheet, statement of cash flows, and statement of changes in shareholders' equity B. income statement, statement of cash flows, statement of financial flexibility, and balance sheet C. statement of cash flows, balance sheet, income statement, and statement of capital equity D. balance sheet, statement of cash flows, statement of retained earnings, and income statement

A. income statement, balance sheet, statement of cash flows, and statement of changes in shareholders' equity

The AICPA Code of Professional Conduct includes which of the following principles? A. objectivity B. professionalism C. quality D. conservatism

A. objectivity

"Members should act in a way that will service the public interest, honor the public trust, an demonstrate commitment to professionalism." This is the Public Interest Principle of the AICPA's Code of Professional Conduct. A. true B. false

A. true

A potential issue facing the convergence project is that many companies have entered into contracts based upon US GAAP financial reporting; many of these contracts will have to be renegotiated using IFRS which potentially could cause some companies more harm than good A. true B. false

A. true

FASB's Emerging Issues Task Force assists and advises the FASB by identifying and addressing timely but more narrow and specific standard setting issues A. true B. false

A. true

The Financial Accounting Standards Board (FASB) began in 1973 after the AICPA phased out the Accounting Principles Board (APB). A. True B. false

A. true

The balance sheet is a snapshot of a company's financial position at a particular date A. true B. false

A. true

The demand for relevant and reliable financial information stems from the needs of internal and external stakeholders A. true B. false

A. true

The mission of the Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and assist in the formation of capital A. true B. flase

A. true

The statement of shareholders' equity reports the effects from the recognition or valuation of certain asset or liability transactions that change Accumulated Other Comprehensive Income A. true B. false

A. true

As a potential equity investor, what information about a company would you be LEAST interested in prior to making an investment decision? A. what are the employee benefits and compensation packages? B. whether they have positive cash flows? C. what differentiates the from their competition? D. whether they are generating a profit?

A. what are the employee benefits and compensation packages

U.S. companies that have subsidiaries in foreign countries can file their financial statements with the SEC by using A. IFRS for their subsidiaries and GAAP for their holdings in the United States B. GAAP C. IFRS D. either IFRS or GAAP

B. GAAP

The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is NOT a commonly required report? A. Form 10-Q. An extensive quarterly report, including financial statements B. Form S-2. A registration statement C. Form 10-K. An extensive annual report, including financial statements D. Form 8-K. A report used to describe significant events may affect the company

B. S-2. A registration statement

For foreign companies that issue securities in the United States to raise capital, the SEC A. accepts all financial statements that use IFRS B. accepts financial statements from foreign companies that use English-language IFRS without exception C. requires these companies to file form 20-F which reconciles certain amounts reported in their financial statements with US GAAP D. accepts only financial statements that are fully stated under US GAAP

B. accepts financial statements from foreign companies that use English-language IFRS without exception

The SEC uses its authority to establish accounting standards, while also enforcing regulations on companies, exchanges, and investors A. true B. false

B. false

The convergence project between the ISAB and GAAP was initiated in 2002 when the two boards entered into the "Northward Agreement". A. true B. false

B. false

Which statement measures and reports the financial results of a company's performance for a period of time? A. balance sheet B. income statement C. statement of financial position D. statement of cash flows

B. income statement

Which of the following is NOT one of the stages used by the FASB process before issuing an Accounting Standards Update? A. conduction research B. obtaining approval from the SEC for the new standard C. holding public hearings D. issuing an exposure draft

B. obtaining approval from the SEC for the new standard

Which Principle of the AICPA Code of Professional Conduct is: A member, as a professional, should exercise sensitive and moral judgements in all their activities? A. due care B. responsibilities C. objectivity and independence D. integrity

B. responsibility

What is Financial Reporting? A. the process of preparing financial accounting information to existing and potential investors, managers, and employees B. the process of communication financial accounting information to existing and potential investors, creditors, lenders, and other external decision makers C. the process of communicating internal accounting information to exiting and potential investors, creditors, lenders, and other external decision makers D. the process of communicating the strategic plan to existing and potential investors, creditors, enders, and other external decision makers

B. the process of communicating financial accounting information to existing and potential investors, creditors, lenders, and other external decision makers

Three major organizations in the private and public sector develop US and International Financial Reporting Standards. They include all of the following EXCEPT the A. FASB ( Financial Accounting Standards Board) B. IASB (International Accounting Standards Board) C. EU (European Union) D. SEC (Securities and Exchange Commission)

C. EU (European Union)

The Financial Accounting Foundation (FAF) is the parent organization of which of the following organizations? A. AAA (American Accounting Association) B. AICPA (American Institute of Certified Public Accountants) C. FASB (Financial Accounting Standards Board) D. SIFMA ( Securities Industry and Financial Markets Association)

C. FASB

The agreement in 2002 by the FASB and IASB to develop high quality, compatible accounting standards that could be used by both domestic and cross-border financial reporting was called the A. Financial Accounting Standards Board Global agreement B. International Accounting Standards agreement C. Norwalk agreement D. United GAAP agreement

C. Norwalk agreement

Auditors face ethical issues because A. auditors may not discover insider trading B. GAAP does not permit fraud C. auditors may express an opinion that may impact employees of a company D. GAAP permits various standards to be used to produce profits

C. auditors may express an opinion that may impact employees of a company

Which of the following is NOT considered an ethical issue in accounting? A. biased financial statement presentation B. accelerated revenue recognition C. industry practices D. earning manipulation

C. industry practices

Creditors' information needs to revolve around all of the following decisions, except A. maintaining a credit relationship B. not extending credit C. investing in credit instruments D. extending credit

C. investing in credit instruments

Prior to 2009, which of the following types of FASB pronouncements carried the highest authority within GAAP by establishing the methods and procedures required on specific accounting issues? A. staff positions B. statements of financial accounting concepts C. statements of financial accounting standards D. technical bulletins

C. statements of financial accounting standards

What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States? A. the SEC coordinates with the FASB in establishing accounting standards B. the SEC reviews financial statements for compliance with U.S. GAAP or IFRS C. the SEC has a mandate to establish accounting standards for corporations listed in the U.S. capital markets D. the SEC requires all companies listed on an exchange to submit their financial statements to the SEC

C. the SEC has a mandate to establish accounting standards for corporations listed in the U.S. capital markets

Beginning in 1938 and extending to the present, which is the correct sequence of accounting rule-making bodies? A. CAP-FASB-APB B. APB-CAP-FASB C. FASB-APB-CAP D. CAP-APB-FASB

D. CAP-APB-FASB

Which organization has the most legal authority? A. Accounting Standards Executive Committee B. Governmental Accounting Standards Board C. Financial Accounting Standards Board D. Securities and Exchange Commission

D. Securities and Exchange Commission

When making decisions, equity investors are interested in assessing A. management's ability to increase the capital providers' investments B. the company's ability to generate cash flows C. the company's ability to pay dividends D. all of these choices are correct

D. all of these choices are correct

What important topics are discussed in the Management Discussion and Analysis section of the financial statements? A. Business risk factors associated with the company B. management provides insight into key decisions implemented during that time period and future developments C. Management utilizes this area as a forum to discuss strategic motives D. all of these choices are discussed

D. all of these choices are discussed

Which of the following is an internal user of a company's financial information? A. union B. bank lending to the company C. shareholder in the company D. company treasurer

D. company treasurer

Notes to financial statements provide A. management's discussions about plans for the future B. comparative financial information with the previous year C. the report of the independent auditors D. discussions that further explain items shown in the financial statements

D. discussions that further explain items shown in the financial statements

The primary reason that financial accounting and managerial accounting have somewhat different objectives is because they A. need information at different times B. need information in different formats C. need information in different geographic locations D. provide information for different decisions

D. provide information for different decisions

What is the correct representation of the income statement? A. revenues - expenses = net income - losses + gains B. revenues - losses - expenses + gains = net income C. revenues + gains - losses - expenses = net income D. revenues - expenses + gains - losses = net income

D. revenues - expenses + gains - losses = net income

Certain U.S. accounting standards have been, and will be, amended to aid in the international convergence process. The process of changing these standards usually involves A. acceptance of the change by the International Revenue Service B. a short deliberation followed by a cote of the U.S. Congress C. rejecting all existing standards and developing an entirely new concept D. selecting the best standards between existing U.S. and international standards

D. selecting the best standards between existing U.S. and international standards

Which of the following is NOT a decision that external stakeholder's of a company financial information would make? A. whether or not to hold the company's stock B. whether or not to extend credit to the company C. whether or not to ask for an increase in employees' benefits during union contract negotiations D. whether or not the company should add a new product line

D. whether or not the company should add a new product line