Intermediate Accounting 13th Edition By Kieso Test Bank

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Intermediate Accounting 13th Edition By Kieso Test Bank

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COMPLETE TEST BANK WITH ANSWERS

 

Intermediate Accounting 13th Edition By Kieso Test Bank

 

 Sample  Questions      

 

 

 

 

 

CHAPTER 1

 

FINANCIAL ACCOUNTING AND

 

ACCOUNTING STANDARDS

 

IFRS questions are available at the end of this chapter.

 

TRUE-FALSEConceptual

 

Answer            No.       Description

 

  • Definition of financial accounting.

 

T2.   Purpose of financial statements.

  • Definition of financial accounting.

T4.   Capital allocation process.

F5.   Financial reports.

F6.   Fair value information.

  • Objectives of financial reporting.

F8.   Accrual accounting.

T9.   Generally accepted accounting principles.

T10.   Users of financial statements.

F11.   Committee on Accounting Procedure.

F12.   Passage of FASB standards.

T13.   Financial Accounting Concepts.

 

  • Definition of financial accounting.

 

T16.   Code of Professional Conduct.

F17.   Accounting standards.

T18.   International standards.

T19.   Expectations gap.

F20.   Ethical issues.

 

MULTIPLE CHOICEConceptual

 

Answer      No.      Description

 

a              21.        Financial accounting.

 

d              22.        Users of financial reports.

  • Identify the major financial statements.

a24.   Financial reporting entity.

  • Differences between financial and managerial accounting.

b26.   Financial reporting communication.

b P27. Managerial accounting.
a 28. Capital allocation process.
  • Efficient use of resources.

d30.   Capital allocation process.

c31.   Financial statement information.

c32.   Accounting profession challenge.

c33.   Financial reporting objective.

d34.   Financial reporting objective.

c              35.        Objectives of financial reporting.

 

 

 

1 2          Test Bank for Intermediate Accounting, Thirteenth Edition

 

MULTIPLE CHOICEConceptual (cont.)

 

Answer      No.      Description

 

  • Accrual accounting.

 

  • P Objectives of financial reporting.
c 38. Meaning of generally accepted.
b 39. Common set of standards and procedures.
a 40. Limitation of general purpose financial statements.
  • Securities and Exchange Commission and accounting standard setting.
  • Due process in FASB standard setting.
d 43. Organizations responsible for setting accounting standards.
b 44. Reason for Accounting Principles Board creation
  • Organization issuing Accounting Research Bulletins.
  • Characteristic of GAAP.
  • Characteristics of GAAP.
  • FASB accounting standards.

b              49.        FASB standard passage.

b              50.        Purpose of Emerging Issues Task Force.

  • AICPA role in standard setting.

c52.   Role of SEC.

c53.   Powers of the SEC.

d54.   SEC enforcement.

d55.   Creation of FASB.

d56.   Appointment of FASB members.

  • Purpose of the Financial Accounting Foundation.
  • Characteristics of FASB.
  • FASB and due process system.
  • Publications of FASB.
  • Purpose of FASB Technical Bulletins.
  • Purpose of Emerging Issues Task Force.

 

  • Pronouncement issued by the APB.

 

  • Standard setting organizations.
  • Identification of standard setting organizations.
  • Statements of financial accounting concepts.
  • P FASB members.
d P69. FASB statement process.
d 70. Nature of GAAP.
  • Body which promulgates GAAP.

d72.   Publications which are not GAAP.

d73.   Publications which are not GAAP.

  • Code for Professional Conduct Rule 203.
  • Purpose of FASB staff position.

 

  • Political environment of standard setting.

 

c78.   International Accounting Standards Board.

 

 

 

Financial Accounting and Accounting Standards 1 3

 

    MULTIPLE CHOICEConceptual (cont.)
Answer No. Description
d 79. Standard setting process pressure.
a 80. Danger of politics in standard setting
c 81. Definition of expectation gap.
b 82. Reason accounting standards differ across countries.
  • Advantage of countries adopting same accounting standards.

a84.   Ethical concern of accountants.

 

  • Note: these questions also appear in the Problem-Solving Survival Guide.

 

 

EXERCISES

 

Item                 Description

 

E1-85                Objectives of financial reporting.

 

E1-86                Development of accounting principles.

E1-87                Publications and organizations.

E1-88                FASB.

E1-89                Evolution of a statement of financial accounting standards.

 

 

 

CHAPTER LEARNING OBJECTIVES

 

  1. Identify the major financial statements and other means of financial reporting.

 

  1. Explain how accounting assists in the efficient use of scarce resources.

 

  1. Describe some of the challenges facing accounting.

 

  1. Identify the objectives of financial reporting.

 

  1. Explain the need for accounting standards.

 

  1. Identify the major policy-setting bodies and their role in the standard-setting process.

 

  1. Explain the meaning of generally accepted accounting principles (GAAP) and the role of the codification for GAAP.

 

  1. Describe the impact of user groups on the rule-making process.

 

  1. Understand issues related to ethics and financial accounting.

 

 

 

1 4          Test Bank for Intermediate Accounting, Thirteenth Edition

 

SUMMARY OF LEARNING OBJECTIVES BY QUESTIONS

 

Item Type Item   Type Item Type Item Type Item Type Item Type Item Type
            Learning Objective 1          
                             
1. TF 21.   MC 23. MC 25. MC P27. MC        
2. TF 22.   MC 24. MC 26. MC            
            Learning Objective 2          
                             
3. TF 4.   TF 28. MC 29. MC 30. MC        
            Learning Objective 3          
                             
5. TF 6.   TF 31. MC 32. MC            
            Learning Objective 4          
                             
7. TF 33.   MC 35. MC P37. MC            
8. TF 34.   MC 36. MC 85. E            
            Learning Objective 5          
                             
9. TF 10   TF 38. MC 39. MC 40. MC 86. E    
            Learning Objective 6          
                             
11. TF 43.   MC 49. MC 55. MC 61. MC 67. MC 89. E
12. TF 44.   MC 50. MC 56. MC 62. MC P68. MC    
13. TF 45.   MC 51. MC 57. MC 63. MC P69. MC    
14. TF 46.   MC 52. MC 58. MC 64. MC P86. E    
41. MC 47.   MC 53. MC 59. MC 65. MC 87. E    
42. MC 48.   MC 54. MC 60. MC 66. MC 88. E    
            Learning Objective 7          
                             
15. TF 70.   MC 72. MC 74. MC 76. MC        
16. TF 71.   MC 73. MC 75. MC            
                           
            Learning Objective 8          
                             
17. TF 19.   TF 77. MC 79. MC 81. MC 83. E    
18. TF 62.   MC 78. MC 80. MC 82. MC        
            Learning Objective 9          
                             
20. TF 84.   MC                    
Note: TF = True-False                    
  MC = Multiple Choice                  
  E = Exercise                      

 

 

 

Financial Accounting and Accounting Standards 1 5

 

 

TRUE-FALSEConceptual

 

  1. Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organiza-tions operations.

 

  1. Financial statements are the principal means through which financial information is communicated to those outside an enterprise.

 

  1. Users of the financial information provided by a company use that information to make capital allocation decisions.

 

  1. An effective process of capital allocation promotes productivity and provides an efficient market for buying and selling securities and obtaining and granting credit.

 

  1. Financial reports in the early 21st century did not provide any information about a companys soft assets.

 

  1. Accounting standards are now less likely to require the recording or disclosure of fair value information due to its inherent subjectivity.

 

  1. While objectives for financial reporting exist on an informal basis, no formal objectives have been adopted.

 

  1. One weakness of accrual accounting is that it does not provide a good indication of the enterprises present and continuing ability to generate favorable cash flows.

 

  1. Some generally accepted accounting principles have simply been accepted as appropriate because of their universal application rather than due to the action of an authoritative accounting rule-making body.

 

  1. Users of financial accounting statements have both coinciding and conflicting needs for information of various types.

 

  1. The Securities and Exchange Commission appointed the Committee on Accounting Procedure.

 

  1. The passage of a new FASB Standards Statement requires the support of five of the seven board members.

 

  1. Financial Accounting Concepts set forth fundamental objectives and concepts that are used in developing future standards of financial accounting and reporting.

 

  1. The AICPA created the Accounting Principles Board in 1959.

 

  1. FASB Technical Bulletins are more authoritative than FASB Standards and Interpretations.

 

  1. The AICPAs Code of Professional Conduct requires that members prepare financial statements in accordance with generally accepted accounting principles.

 

 

 

1 6          Test Bank for Intermediate Accounting, Thirteenth Edition

 

  1. Accounting standards are a product of careful logic or empirical findings and are not influenced by political action.

 

  1. Currently, both U.S. GAAP and the International Financial Reporting Standards are acceptable for international use.

 

  1. The expectations gap is caused by what the public thinks accountants should be doing and what accountants think they can do.

 

  1. Ethical issues in financial accounting are governed by the AICPA.

 

 

True-False AnswersConceptual

 

Item Ans. Item Ans. Item Ans. Item Ans.
1. F 6. F 11. F 16. T
2. T 7. F 12. F 17. F
3. T 8. F 13. T 18. T
4. T 9. T 14. T 19. T
5. F 10. T 15. F 20. F

 

 

 

MULTIPLE CHOICEConceptual

 

  1. General-purpose financial statements are the product of

 

  1. financial accounting.
  2. managerial accounting.
  3. both financial and managerial accounting.
  4. neither financial nor managerial accounting.

 

  1. Users of financial reports include all of the following except

 

  1. government agencies.
  2. All of these are users.

 

  1. The financial statements most frequently provided include all of the following except the

 

  1. balance sheet.
  2. income statement.
  3. statement of cash flows.
  4. statement of retained earnings.

 

  1. The information provided by financial reporting pertains to

 

  1. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.
  2. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.

 

  1. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers.
  2. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

 

 

 

Financial Accounting and Accounting Standards 1 7

 

 

  1. All the following are differences between financial and managerial accounting in how accounting information is used except to

 

  1. plan and control companys operations.
  2. decide whether to invest in the company.
  3. evaluate borrowing capacity to determine the extent of a loan to grant.
  4. All the above.

 

  1. Which of the following represents a form of communication through financial reporting but not through financial statements?

 

  1. Balance sheet.
  2. Presidents letter.
  3. Income statement.
  4. Notes to financial statements.

 

P27.     The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organizations operations is called

 

  1. financial accounting.
  2. managerial accounting.
  3. tax accounting.

 

  1. How does accounting help the capital allocation process attract investment capital?

 

  1. Provides timely, relevant information.
  2. Encourages innovation.
  3. Promotes productivity.
  4. a and b above.

 

  1. Whether a business is successful and thrives is determined by

 

  1. free enterprise.
  2. all of these.

 

  1. An effective capital allocation process

 

  1. promotes productivity.
  2. encourages innovation.
  3. provides an efficient market for buying and selling securities.
  4. all of these.

 

  1. Financial statements in the early 2000s provide information related to

 

  1. nonfinancial measurements.
  2. forward-looking data.
  3. hard assets (inventory and plant assets).
  4. none of these.

 

  1. Which of the following is not a major challenge facing the accounting profession?

 

  1. Nonfinancial measurements.
  2. Accounting for hard assets.
  3. Forward-looking information.

 

 

 

1 8          Test Bank for Intermediate Accounting, Thirteenth Edition

 

 

  1. What is a major objective of financial reporting?

 

  1. Provide information that is useful to management in making decisions.
  2. Provide information that clearly portray nonfinancial transactions.
  3. Provide information that is useful to assess the amounts, timing, and uncertainty of perspective cash receipts.
  4. Provide information that excludes claims to the resources.

 

  1. What is a major objective of financial reporting?

 

  1. Provide information that is useful to the Internal Revenue Service in determining the amount of federal income taxes payable.
  2. Provide information that is useful in assessing the amounts and timing of revenue.
  3. Provide information that is comprehensible only by sophisticated investors.
  4. Provide information that clearly portrays the economic resources of an enterprise.

 

  1. Which of the following statements is not an objective of financial reporting?

 

  1. Provide information that is useful in investment and credit decisions.
  2. Provide information about enterprise resources, claims to those resources, and changes to them.
  3. Provide information on the liquidation value of an enterprise.
  4. Provide information that is useful in assessing cash flow prospects.

 

  1. Accrual accounting is used because

 

  1. cash flows are considered less important.
  2. it provides a better indication of ability to generate cash flows than the cash basis.
  3. it recognizes revenues when cash is received and expenses when cash is paid.
  4. none of the above.

 

  1. One objective of financial reporting is to provide

 

  1. information about the investors in the business entity.
  2. information about the liquidation values of the resources held by the enterprise.
  3. information that is useful in assessing cash flow prospects.
  4. information that will attract new investors.

 

  1. Accounting principles are generally accepted only when

 

  1. an authoritative accounting rule-making body has established it in an official pro-nouncement.
  2. it has been accepted as appropriate because of its universal application.
  3. both a and b.
  4. neither a nor b.

 

  1. A common set of accounting standards and procedures are called

 

  1. financial accounting standards.
  2. generally accepted accounting principles.
  3. objectives of financial reporting.
  4. statements of financial accounting concepts.

 

 

 

Financial Accounting and Accounting Standards 1 9

 

 

  1. Which of the following is a general limitation of general purpose financial statements?

 

  1. General purpose financial statements may not be the most informative for a specific enterprise.
  2. General purpose financial statements are comparable.
  3. General purpose financial statements are assumed to present fairly the companys financial operations.

 

  1. None of the above.

 

  1. What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?

 

  1. The SEC requires all companies listed on an exchange to submit their financial statements to the SEC.

 

  1. The SEC coordinates with the AICPA in establishing accounting standards.
  2. The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
  3. The SEC reviews financial statements for compliance.

 

  1. What is due process in the context of standard setting at the FASB?

 

  1. FASB operates in full view of the public.
  2. Public hearings are held on proposed accounting standards.
  3. Interested parties can make their views known.
  4. All of the above.

 

  1. Which of the following organizations has been responsible for setting U.S. accounting standards?

 

  1. Accounting Principles Board.
  2. Committee on Accounting Procedure.
  3. Financial Accounting Standards Board.
  4. All of the above.

 

  1. Why did the AICPA create the Accounting Principles Board?

 

  1. The SEC disbanded the previous standard setting organization.
  2. The previous standard setting organization did not provide a structured set of accounting principles.

 

  1. No such organization existed in the past.
  2. None of the above.

 

  1. Which organization was responsible for issuing Accounting Research Bulletins?

 

  1. Accounting Principles Board.
  2. Committee on Accounting Procedure.
  3. The SEC.

 

  1. A characteristic of generally accepted accounting principles include the following

 

  1. common set of standards and principles.
  2. standards and principles are based federal statutes.
  3. acceptance requires an affirmative vote of Certified Public Accountants.
  4. practices that become accepted for at least a year by all industry members.

 

 

 

1 10       Test Bank for Intermediate Accounting, Thirteenth Edition

 

 

  1. Characteristics of generally accepted accounting principles include all of the following except

 

  1. authoritative accounting the rule-making body established a principle of reporting.
  2. standards are considered useful by the profession.
  3. each principle is approved by the SEC.
  4. practice has become universally accepted over time.

 

  1. Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight?

 

  1. Smaller membership.
  2. FASB board members are well-paid.
  3. FASB board members must be CPAs.
  4. Due process.

 

  1. The passage of a new FASB Standards Statement requires the support of

 

  1. all Board members.
  2. three Board members.
  3. four Board members.
  4. five Board members.

 

  1. What is the purpose of Emerging Issues Task Force?

 

  1. Provide interpretation of existing standards.
  2. Provide a consensus on how to account for new and unusual financial transactions.
  3. Provide interpretive guidance.
  4. Provide timely guidance on select issues.

 

  1. Which organization is responsible for issuing Emerging Issues Task Force Statements?

 

  1. FASB
  2. CAP
  3. APB
  4. SEC

 

  1. The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as
    1. consistently primary.
    2. consistently secondary.
    3. sometimes primary and sometimes secondary.
    4. non-existent.

 

  1. The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the

 

 

 

 

Financial Accounting and Accounting Standards 1 11

 

 

  1. Companies that are listed on a stock exchange are required to submit their financial statements to the

 

  1. APB

 

  1. The Financial Accounting Standards Board (FASB) was proposed by the

 

  1. American Institute of Certified Public Accountants.
  2. Accounting Principles Board.
  3. Study Group on the Objectives of Financial Statements.
  4. Special Study Group on establishment of Accounting Principles (Wheat Committee).

 

  1. The Financial Accounting Standards Board

 

  1. has issued a series of pronouncements entitled Statements on Auditing Standards.
  2. was the forerunner of the current Accounting Principles Board.
  3. is the arm of the Securities and Exchange Commission responsible for setting financial accounting standards.
  4. is appointed by the Financial Accounting Foundation.

 

  1. The Financial Accounting Foundation

 

  1. oversees the operations of the FASB.
  2. oversees the operations of the AICPA.
  3. provides information to interested parties on financial reporting issues.
  4. works with the Financial Accounting Standards Advisory Council to provide informa-tion to interested parties on financial reporting issues.

 

  1. The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is

 

  1. the FASB issues exposure drafts of proposed standards.
  2. all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.
  3. all members of the FASB possess extensive experience in financial reporting.
  4. a majority of the members of the FASB are CPAs drawn from public practice.

 

  1. The Financial Accounting Standards Board employs a due process system which

 

  1. is an efficient system for collecting dues from members.
  2. enables interested parties to express their views on issues under consideration.
  3. identifies the accounting issues that are the most important.
  4. requires that all accountants must receive a copy of financial standards.

 

  1. Which of the following is not a publication of the FASB?

 

  1. Statements of Financial Accounting Concepts
  2. Accounting Research Bulletins
  3. Interpretations
  4. Technical Bulletins

 

 

 

1 12       Test Bank for Intermediate Accounting, Thirteenth Edition

 

 

  1. FASB Technical Bulletins

 

  1. are similar to FASB Interpretations in that they establish enforceable standards under the AICPAs Code of Professional Ethics.
  2. are issued monthly by the FASB to deal with current topics.
  3. are not expected to have a significant impact on financial reporting in general and provide guidance when it does not conflict with any broad fundamental accounting principle.

 

  1. were recently discontinued by the FASB because they dealt with specialized topics having little impact on financial reporting in general.

 

  1. The purpose of the Emerging Issues Task Force is to

 

  1. develop a conceptual framework as a frame of reference for the solution of future problems.
  2. lobby the FASB on issues that affect a particular industry.
  3. do research on issues that relate to long-term accounting problems.
  4. issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly.

 

  1. The American Institute of Certified Public Accountants (AICPA) continues to be involved in all of the following except

 

  1. developing and enforcing professional ethics.
  2. developing auditing standards.
  3. providing professional education programs.
  4. all of the above.

 

P64.      Which of the following pronouncements were issued by the Accounting Principles Board?

  1. Accounting Research Bulletins
  2. Opinions
  3. Statements of Position
  4. Statements of Financial Accounting Concepts

 

  1. Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States?
    1. AICPA
    2. FASB
    3. IASB
    4. SEC

 

  1. An organization that has not published accounting standards is the

 

  1. American Institute of Certified Public Accountants.
  2. Securities and Exchange Commission.
  3. Financial Accounting Standards Board.
  4. All of these have published accounting standards.

 

  1. The purpose of Statements of Financial Accounting Concepts is to

 

  1. establish GAAP.
  2. modify or extend the existing FASB Standards Statement.
  3. form a conceptual framework for solving existing and emerging problems.
  4. determine the need for FASB involvement in an emerging issue.

 

 

 

Financial Accounting and Accounting Standards 1 13

 

P68.     Members of the Financial Accounting Standards Board are

  1. employed by the American Institute of Certified Public Accountants (AICPA).
  2. part-time employees.
  3. required to hold a CPA certificate.
  4. independent of any other organization.

 

P69.     The following published documents are part of the due process system used by the

FASB in the evolution of a typical FASB Statement of Financial Accounting Standards:

 

  1. Exposure Draft

 

  1. Statement of Financial Accounting Standards
  2. Preliminary Views

 

The chronological order in which these items are released is as follows:

 

  1. 1, 2, 3.
  2. 1, 3, 2.
  3. 2, 3, 1.
  4. 3, 1, 2.

 

  1. Generally accepted accounting principles

 

  1. include detailed practices and procedures as well as broad guidelines of general application.
  2. are influenced by pronouncements of the SEC and IRS.
  3. change over time as the nature of the business environment changes.
  4. all of these.

 

  1. The most significant current source of generally accepted accounting principles is the

 

 

  1. Which of the following is not a part of generally accepted accounting principles?

 

  1. FASB Interpretations
  2. CAP Accounting Research Bulletins
  3. APB Opinions
  4. All of these are part of generally accepted accounting principles.

 

  1. Which of the following publications does not qualify as a statement of generally accepted accounting principles?
    1. Statements of financial standards issued by the FASB
    2. Accounting interpretations issued by the FASB
    3. APB Opinions
    4. Accounting research studies issued by the AICPA

 

  1. Rule 203 of the Code of Professional Conduct address:

 

  1. ethical requirements.
  2. financial statements should be based on generally accepted accounting principles.
  3. advertising to obtained clients.
  4. auditing financial statements.

 

 

 

1 14       Test Bank for Intermediate Accounting, Thirteenth Edition

 

 

  1. What is the purpose of a FASB Staff Position?

 

  1. Provide interpretation of existing standards.
  2. Provide a consensus on how to account for new and unusual financial transactions.
  3. Provide interpretive guidance.
  4. Provide timely guidance on select issues.

 

 

  1. Which of the following is not considered a component of generally accepted accounting principles?

 

  1. FASB Implementation Guides.
  2. Widely recognized industry practices.
  3. Articles published in CPA journals.
  4. AICPA Accounting Interpretations.

 

  1. Financial accounting standard-setting in the United States

 

  1. can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.

 

  1. is based solely on research and empirical findings.
  2. is a legalistic process based on rules promulgated by governmental agencies.
  3. is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.

 

  1. The purpose of the International Accounting Standards Board is to

 

  1. issue enforceable standards which regulate the financial accounting and reporting of multinational corporations.
  2. develop a uniform currency in which the financial transactions of companies through-out the world would be measured.

 

  1. promote uniform accounting standards among countries of the world.
  2. arbitrate accounting disputes between auditors and international companies.

 

  1. What is not a source of pressure that may influence the accounting standard setting process?

 

  1. CPA firms.
  2. None of the above.

 

  1. What is a possible danger if politics plays too big a role in accounting standard setting?

 

  1. Accounting standards that are not truly generally accepted.
  2. Individuals may influence the standards.
  3. User groups become active.
  4. The FASB delegates its authority to elected officials.

 

 

 

Financial Accounting and Accounting Standards 1 15

 

 

  1. What is expectation gap?

 

  1. The difference between what the public thinks the accountant is not doing and what the accountant knows they dont do.
  2. The difference between what the public thinks the accountant is doing and what Congress says the accountant is doing.
  3. The difference between what the public thinks the accountant is doing and what the accountant thinks they can do.

 

  1. The difference between what the accountant is doing and what the Courts say the accountant should be doing.

 

  1. What is not a reason that accounting standards may differ across countries?

 

  1. Past Practice.

 

  1. What would be an advantage of having all countries adopt and follow the same accounting standards?

 

  1. Lower preparation costs.
  2. b and c

 

  1. Which of the following is an ethical concern of accountants?

 

  1. Earnings manipulation.
  2. Conservative accounting.
  3. Industry practices.
  4. None of the above.

 

 

Multiple Choice AnswersConceptual

 

Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
21. a 31. c 41. c 51. a 61. c 71. d 81. c
22. d 32. c 42. d 52. c 62. d 72. d 82. b
23. d 33. c 43. d 53. c 63. b 73. d 83. d
24. a 34. d 44. b 54. d 64. b 74. b 84. a
25. d 35. c 45. b 55. d 65. c 75. c    
26. b 36. b 46. a 56. d 66. d 76. c    
27. b 37. c 47. c 57. a 67. c 77. a    
28. a 38. c 48. d 58. b 68. d 78. c    
29. d 39. b 49. b 59. b 69. d 79. d    
30. d 40. a 50. b 60. b 70. d 80. a    

 

 

 

1 16       Test Bank for Intermediate Accounting, Thirteenth Edition

 

 

EXERCISES

 

Ex. 1-85Objectives of financial reporting.

 

What are the objectives of financial reporting by business enterprises?

 

 

Solution 1-85

 

The objectives of financial reporting are to provide information:

 

  • that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions.

 

  • to help users in assessing the amounts, timing, and uncertainty of prospective cash flows.

 

  • clearly portraying the economic resources of an enterprise, the claims to those resources, and the effects of transactions, events, and circumstances that change its resources and obligations.

 

 

 

 

Ex. 1-86Development of accounting principles.

 

 

Presented below are three independent, unrelated statements regarding the formulation of generally accepted accounting principles. Each statement contains some incorrect or debatable statement(s).

Statement I

 

The users of financial accounting statements have coinciding and conflicting needs for statements of various types. To meet these needs, and to satisfy the financial reporting responsibility of management, accountants prepare different sets of financial statements for different users.

 

Statement II

 

The FASB should be responsive to the needs and viewpoints of the entire economic community, not just the public accounting profession. The FASB therefore will succeed because it will deal effectively with all interested groups.

 

 

Statement III

 

The Securities and Exchange Commission is very concerned about financial reporting and has formulated a committee called the Accounting Standards Executive Committee (AcSEC) to provide input to the FASB. In addition, after each FASB Statement is issued, the AcSEC issues Statements of Position stating its position on the FASB statement.

 

Instructions

 

Evaluate each of the independent statements and identify the areas of fallacious reasoning in each. Explain why the reasoning is incorrect. Complete your discussion of each statement before proceeding to the next statement.

 

 

 

Financial Accounting and Accounting Standards 1 17

 

 

 

Solution 1-86

 

Statement I

 

It is true that users of financial accounting statements have coinciding and conflicting needs for statements of various types. However, to meet these needs, accountants generally prepare a single set of general-purpose financial statements, rather than a number of different types of financial statements. It may be argued that accountants often do prepare special statements for particular purposes, but in general the accounting profession has relied on general purpose financial statements prepared in conformance with generally accepted accounting principles.

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