Chapter 1 - pre test PDF

Preview

Summary

pre test...

Description

Chapter 1 . Smart Book 1.Financial accounting is chiefly concerned with providing information to various Blank 1 of 1 external users. (Enter only one word.) 2. Which of the following are external users of financial information? creditors household investors suppliers government agencies 3. Which organizations provide financial information to external users? charitable organizations profit-oriented businesses financial intermediaries creditors 4. Which of the following is a financial statement provided to investors? Statement of investments Statement of shareholders' equity Statement of management discussion Statement of audit report 5. What is the primary function of financial accounting? Provide financial information for tax purposes. Provide financial information to regulatory agencies. Provide information to internal users of the business. Provide useful information to users external to the business. 6. True or false: The term financial reporting is used to refer to the process of providing financial information to internal users. True Reason: Financial reporting refers to the process of providing financial information to external users. AS : False

7. Financial accounting is primarily concerned with providing financial information to external users. True False Reason: The primary objective of financial accounting is to provide financial information to external users.

8. We can think of the capital markets as a composite of all creditors investors corporations auditors 9. Labor unions and creditors are examples of Blank 1 of 1 external or outside users of financial information. (Enter only one word.) 10. True or false: In the United States, we have a free enterprise economy with the majority of productive resources being government owned. True ( Reason: The majority of productive resources are privately owned.) False 11. Which of the following are providers of financial information? Companies households customers investors schools 12. In the United States, corporations acquire capital in which of the following ways? from the sale of buildings and equipment by providing services to customers from creditors by borrowing from investors in exchange for ownership interest 13. Which are the financial statements most frequently provided to external users? (Select all that apply.) income statement balance sheet statement of shareholders' equity

management discussion section audit report statement of cash flows 14. The primary forms of business organization in the United States are the sole proprietorship, the Blank 1 of 1. Partnership and the corporation. 15. Financial reporting is the process of preparing proforma financial statements and notes providing information to outside users reporting current period income to the board of directors closing the temporary accounts 16. The capital markets foster an efficient allocation of resources , Correct Unavailable

Blank 1Blank

1

17. On January 1, 20X1, an investor purchases shares of stock in a company for $10,000 cash. At the end of 20X1, the investor receives $400 in dividends and sells his ownership at the end of 20X1 for $10,600. What is the return on investment? 4% 6% 9.4% 10% 18. In the United States, we have an economy where the majority of productive resources are privately owned rather than government owned. This is an example of what? Government enterprise Free enterprise Private enterprise 19. In the United States, corporations acquire capital from which of the following sources? the SEC tax revenues investors creditors 20. True or false: In the United States, sole proprietorships and partnerships outnumber corporations. True False

21. A corporation's shareholders will receive cash from their investment in which of the following ways? A long-term note Periodic dividends Sale of assets 22. true or false: The term financial reporting is used to refer to the process of providing financial information to internal users. True Reason: Financial reporting refers to the process of providing financial information to external users. False 23. On January 1, 20X1, Jennifer purchases common stock of Gamma Corporation for $100,000. During the year, Gamma Corporation stock pays a dividend of $3,000. At the end of the year, Jennifer sells the Gamma stock for $104,000. What is the return on investment of the Gamma stock? 7% 10% Reason: The return on investment is calculated as the dividends received plus the appreciation in the value of the stock divided by the initial investment in the stock. ROI is ($3,000 + 4,000)/$100,000 = 7%. 3% Reason: The return on investment is calculated as the dividends received plus the appreciation in the value of the stock divided by the initial investment in the stock. ROI is ($3,000 + 4,000)/$100,000 = 7%. 4% Reason: The return on investment is calculated as the dividends received plus the appreciation in the value of the stock divided by the initial investment in the stock. ROI is ($3,000 + 4,000)/$100,000 = 7%.

Correct Answer 24. True or false: The uncertainty of the return on an investment is also referred to as risk. True False 25. The majority of productive resources are privately owned in a Blank 1 of 1 free enterprise economy. (Enter one word per blank)

26. In the United States, corporations acquire capital in which of the following ways? from investors in exchange for ownership interest by providing services to customers from the sale of buildings and equipment from creditors by borrowing

27. A company generates profits when it provides goods and services and losses exceed gains. revenues are greater than expenses. investing activities are greater than financing activities. assets exceed liabilities. 28. Investors and Creditors are willing to provide capital to a corporation only if they expect to receive more cash in return at some time in the future. 29. The process of providing information to external users is referred to as financial , reporting , or accounting 30. The objectives of financial accounting include (Select all that apply.) provide information used to evaluate future cash flows. regulate businesses in the United States. provide information to investors and creditors. regulate businesses globally. provide managers with internal information for decisions. 31. The uncertainty regarding an investment is also referred to as risk 32. The accrual accounting model is best able to achieve the goal of predicting future cash flows 33. An investment that has higher risk also has greater cash flows. a lower return on investment. lower income for the period. more uncertainty of returns. 34. Net operating cash flow is found in which accounting model? Accrual basis Cash basis

35. Financial accounting provides investors with information that should help them to evaluate the (Select all that apply.) uncertainty of the firm's future cash flow. accuracy of the firm's future cash flow. timing of the firm's future cash flow. amounts of the firm's future cash flow.

36. What accounting model produces a measure called net operating cash flow? Cost basis Cash basis Accrual basis 37. Which of the following models is best in helping predict future cash flows? Cost accounting Cash accounting Accrual accounting 38. True or false: Net operating cash flow is a good indicator of a company's long-run cash-generating ability. True False 39. True or false: Investors expect that if an investment has greater risk, it should also pay a higher return. True False 40. What is net operating cash flow? The sum of cash receipts and cash disbursements for all expenditures during a period. The difference between cash receipts and cash disbursements from providing goods and services during a period. The difference between revenues and expenses during a period. 41. The accrual accounting model measures the entity's accomplishments and resource sacrifices during the period regardless of when Blank 1 of 1 cash, money, or monies is received or paid 42. Cash basis accounting measures the difference between cash receipts and payments during a reporting period.

43. The difference between revenue and expenses when revenue is greater is called net income 44. Which accounting model best meets the primary goal of users of financial reporting? Cash basis Net basis Cost basis Accrual basis

45. Which of the following instances indicate net operating cash flow may not be a good predictor of long-run cash-generating ability? (Select all that apply.) A company pays a service technician the day work is performed A customer pays for services provided in a prior period A company pays cash to purchase a 2 year insurance policy 46. True or false: Resource inflows and outflows may not correspond to cash inflows and outflows. True False 47. The accrual accounting model's measure of resources provided by business operations is called revenue 48. What financial reporting model is used by most profit-oriented businesses and not-for-profit entities? cash basis accounting cost accounting accrual accounting tax accounting 49. Claire's revenues are greater than her expenses. Claire has net Blank 1 of 1 income for the period 50. The abbreviation GAAP stands for generally Blank 1 of 1 accepted accounting principles.

51.

Question Mode

Matching Question Match the financial reporting law with its requirements. Drag and drop application. 1933 Securities Act Sets forth accounting and disclosure requirements for initial public offerings of securities. 1934 Securities and Exchange Act Mandates reporting requirements for companies whose stock is publicly traded. 52. Accrual income attempts to measure the resource inflows and outflows generated by the company's Blank 1 of 1 operations during the reporting period. 53. If the SEC does not agree with a standard issued by the private sector, it can create another accounting standard setting body. issue a new FASB statement. remove FASB board members from their position. force a change in the standard. 54. True or false: Cash basis accounting is the required accounting method for most profit-oriented companies. True False 55. Which accounting standard setting body replaced the Accounting Principles Board in 1973? Securities and Exchange Commission American Institute of Certified Public Accountants Public Company Accounting Oversight Board Financial Accounting Standards Board 56. Generally accepted accounting principles are abbreviated as GAAP 57. The first private accounting standard setting body in the United States was the Financial Accounting Standards Board. Committee on Accounting Procedure. Accounting Principles Board. Securities and Exchange Commission. 58. The 1933 and 1934 Acts were designed to restore investor Blank 1 of 1 confidence, faith, belief, or trust in the stock market.

59. The AICPA is the national professional organization for certified professional public Blank 1 of 1. Accountants (Enter only one word.) 60. The FASB was established to set U.S. accounting standards and is the current standard setting body 61. The SEC has the authority to set accounting standards for companies, but has delegated the task to the private sector. 62. The Emerging Issues Task Force (EITF) was formed to resolve _________ financial accounting issues within the framework of existing GAAP. narrowly-defined conceptual ill-defined broad-reaching 63. List the private accounting standard setting bodies in chronological order beginning with the oldest organization. 1. Committee on Accounting Procedure. 2. Accounting Principles Board 3. Financial Accounting Standards Board 64. In addition to issuing accounting standards, the FASB has formulated a conceptual Blank 1 of 1 t framework to provide an underlying theoretical and conceptual structure for accounting standards. 65. The first body to set accounting standards in the U.S. was the CAP 66. which organization is currently the national professional organization for certified professional public accountants? The CAP The AIA The APB The AICPA 67. The acronym for the private sector organization that sets accounting standards in the United States is the SEC AICPA FASB APB 68. What was the purpose of the FASB Accounting Standards Codification project? Reorganize all relevant accounting pronouncements in U.S. GAAP.

Issue new accounting pronouncements. Integrate international standards with U.S. accounting standards. 69. The Emerging Issues Task Force (EITF) was formed to address long-term accounting problems and set standards. identify potential problem areas and provide a timely response to issues. prepare exposure drafts for Statements of Financial Accounting Standards. 70. The citation used to reference generally accepted accounting principles is ACSS. GAAP. FASB ASC. FAS. 71. Which of the following provides an underlying structure for the development of accounting standards? The Conceptual Framework EITF Issue Consensuses Statements of Financial Accounting Standards FASB Staff Positions

72. The first private accounting standard setting body in the United States was the Securities and Exchange Commission. Accounting Principles Board. Committee on Accounting Procedure. Financial Accounting Standards Board. 73. The acronym GASB refers to the Government Accounting and State Bylaws. Government Accounting Standards Board. Generally Accepted Standards Board. General Accounting Standards Bylaws. 74. The FASB Accounting Standards codification organizes all relevant accounting pronouncements in a searchable, online database 75. The acronym for the Accounting Standards Codification is ASC 76. The organization that develops global accounting standards is the International Accountants Society Bylaws.

International Accountants Standards and Bylaws. International Accounting Standards Board. 77. The organization that is responsible for the standard setting process for states and cities in the United States is the Generally Accepted Standards and Bylaws. Government Authority for Standards and Bylaws. Governmental Accounting Standards Board. General Accounting State Board. 78. The IASB's main objective is to develop a single set of global accounting standards that are high-quality, understandable, and enforceable. 79. As of July 1, 2009, the single source of nongovernmental U.S. GAAP is found in the AICPA professional standards. FASB statements. SEC literature. Accounting Standards Codification. 80. The IASB is dedicated to developing a set of high-quality, understandable, and enforceable global, international, universal, or world accounting standards.

81. The International Accounting Standards Committee (IASC) reorganized in 2001 to create a new standard-setting body called the International Accounting Standards Board (IASB). The IASB issues global accounting standards called Global Financial Reporting Standards International Financial Reporting Standards European Accounting Standards International Accounting Standards

82. The Financial Accounting Foundation provides oversight, appoints members, and raises funds to support the: EITF FASB SEC IASB

83. Which of the following represents the IASB's primary objective? To lower the cost of capital on global markets To control the international standard setting process To develop high quality global standards used to make economic decisions 84. The FASB Codification project revised and updated U.S. accounting standards with international accounting standards. True False 85. Which of the following would be a likely advantage of a single set of accounting standards? Less need for issuing consolidated financial statements Enhanced export and import opportunities Enhanced financial statement comparability 86. Correctly match the organizations shown on the left with the standards and functions on the right. Securities and Exchange Commission Securities and Exchange Commission answer drop zone Group dealing with emerging issues - U.S. GAAP incorrect toggle button unavailable Group dealing with emerging issues - U.S. GAAP International Organization of Securities Commissions International Organization of Securities Commissions answer drop zone Regulatory oversight - IFRS correct toggle button unavailable Regulatory oversight - IFRS Emerging Issues Task Force Emerging Issues Task Force answer drop zone Regulatory oversight - U.S. GAAP incorrect toggle button unavailable Regulatory oversight - U.S. GAAP IASB IASB answer drop zone Standard-setting board - IFRS correct toggle button unavailable Standard-setting board - IFRS

Correct Answer Securities and Exchange Commission matches Choice, Regulatory oversight - U.S. GAAP Regulatory oversight - U.S. GAAP International Organization of Securities Commissions matches Choice, Regulatory oversight - IFRS Regulatory oversight - IFRS

Emerging Issues Task Force matches Choice, Group dealing with emerging issues - U.S. GAAP Group dealing with emerging issues - U.S. GAAP IASB matches Choice, Standard-setting board - IFRS Standard-setting board - IFRS 87. The International Accounting Standards Committee issued International Accounting Standards (IAS), whereas the International Accounting Standards Board currently issues Globally Accepted Accounting Principles. International Financial Reporting Standards. International Accounting and Auditing Standards. General Guidelines for Global Reporting. 88. Which of the following represent(s) an important objective of the IASB? To lower the cost of capital on global markets To control the global standard setting process To develop high quality global standards 89. Differences in implementation and enforcement of IFRS across countries can impact comparability or uniformity of financial statements. 90. What was the purpose of the FASB Accounting Standards Codification project? Reorganize all relevant accounting pronouncements in U.S. GAAP. Issue new accounting pronouncements. Integrate international standards with U.S. accounting standards. 91. Which of the following would be a likely advantage of a single set of accounting standards? Enhanced export and import opportunities Less volatile exchange rates Easier access to capital 92. Which of the following are common arguments against the creation of a single set of global accounting standards? (Select all that apply.) Accounting under IFRS will appear more uniform than it actually is Global standards will lead to more complex accounting standards Maintaining competition between accounting standard-setting bodies improves quality Implementation and enforcement of IFRS varies among nations

93. In 2007, the SEC eliminated the requirement of foreign companies issuing stock in the United States to include a reconciliation of IFRS to U.S. GAAP in their financial statements. True False 94. The International Accounting Standards Committee provides oversight, appoints members, and raises funds to support the: EITF FASB SEC IASB 95. In which of the following areas did the FASB and IASB already develop converged accounting standards? (Select all that apply.) Earnings-per-share Share-based compensation Lease accounting Financial instruments Non-monetary exchanges 96. Recent events suggest that full convergence ________ be achieved in the foreseeable future. will will not 97. Before issuing an Accounting Standards Update, the FASB undertakes a series of information-gathering steps including deliberations open hearings company visits written comments 98. In 2007, the SEC eliminated the requirement for foreign or international companies that issue stock in the United States to include in their financial statements a reconciliation of IFRS to U.S. GAAP. 99. The FASB's standard setting process begins when the board adds a project to its technical agenda. Identify the final step in this process. The board deliberates at one or more public meetings. The board issues an Exposure Draft or Discussion Paper. The staff analyzes comment letters. The Board issues an Accounting Standards Update.

100. Why is accounting standard setting a political process? (Select all that apply.) Changes in standards can result in a substantial redistribution of wealth within our economy. Accounting standards can be legally enforced ...