Question 1

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

Accepted Answer

If a country experiences severe inflatio...

Question 2

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) All of the above

Question 3

Gains are:

Accepted Answer

A)  Inflows from selling a product or service to a customer.
B)  Increases in equity resulting from transfers of assets to the company from owners.
C)  Increases in equity from peripheral transactions of an entity.
D)  None of the above is correct.E) A) and D)
F) B) and C)

Question 4

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) ? The Act:

Accepted Answer

A)  Changed the entity responsible for setting auditing standards.
B)  Increased corporate executive responsibility for financial statements.
C)  Limited nonaudit services that can be performed by auditors for audit clients.
D)  Changed the entity responsible for setting accounting standards.E) A) and B)
F) B) and C)

Question 5

The FASB's framework for measuring fair value doesn't change the situations in which fair value is used under current GAAP.

Accepted Answer

A) True 
 B)False

Question 6

Identify or define the following terms: economic entity,going concern.

Accepted Answer

Economic entity:All economic events can ...

Question 7

The asset/liability approach emphasizes:

Accepted Answer

A)  Whether amounts on the balance sheet meet the definitions of assets and liabilities.
B)  A close relation between the balance sheet and the statement of cash flows.
C)  The distinction between net assets and gross assets.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 8

Use the following to answer questions
The following information ($ in millions)comes from a recent annual report of Amazon.com,Inc.:
 
-Compute Amazon's total liabilities at the end of the year.

Accepted Answer

Total assets = Total liabiliti...

Question 9

GAAP is an abbreviation for:

Accepted Answer

A)  Generally authorized accounting procedures.
B)  Generally applied accounting procedures.
C)  Generally accepted auditing practices.
D)  Generally accepted accounting principles.E) None of the above
F) A) and B)

Question 10

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 concep...

Question 11

The conceptual framework's qualitative characteristic of relevance includes:

Accepted Answer

A)  Predictive value.
B)  Verifiability.
C)  Completeness.
D)  Neutrality.E) A) and B)
F) B) and C)

Question 12

Use the following to answer questions
The following information ($ in millions)comes from a recent annual report of Amazon.com,Inc.:
 
-Compute the income before income tax for Amazon.

Accepted Answer

Net income = Gross profit - Op...

Question 13

Which of the following is not a concern expressed by the SEC regarding IFRS adoption by the U.S.?

Accepted Answer

A)  Need for the U.S.to have strong influence on the standard-setting process and ensure that standards meet U.S.needs.
B)  The language barriers associated with cooperation among many countries in developing IFRS.
C)  The high costs to companies of converting to IFRS.
D)  The fact that many laws,regulations and private contracts reference U.S.GAAP.E) C) and D)
F) B) and C)

Question 14

The most likely important flaw leading to the demise of the APB was the perceived lack of:

Accepted Answer

A)  Confidence.
B)  Competence.
C)  Independence.
D)  Importance.E) None of the above
F) B) and C)

Question 15

With respect to the financial statements,what is the value of an audit?

Accepted Answer

Outside auditors add credibility to fina...

Question 16

Elements of financial statements do not include:

Accepted Answer

A)  Monetary unit.
B)  Investments by owners.
C)  Comprehensive income.
D)  Losses.E) C) and D)
F) B) and D)

Question 17

Briefly describe how materiality is featured in the conceptual framework.

Accepted Answer

Materiality-Information is material if i...

Question 18

The assumption that in the absence of contrary information a business entity will continue indefinitely is the:

Accepted Answer

A)  Periodicity assumption.
B)  Entity assumption.
C)  Going concern assumption.
D)  Historical cost assumption.E) C) and D)
F) A) and B)

Question 19

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 20

Compute net income for the first year for Alpaca Corporation.

Accepted Answer

The answer of Compute net income for the first year...

Exam 1: Environment and Theoretical Structure of Financial Accounting

The conceptual framework's qualitative characteristic of relevance includes:

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 AnswerverifiedIf a country experiences severe inflatio...View AnswerShow Answer

The most likely important flaw leading to the demise of the APB was the perceived lack of:

Correct AnswerverifiedShow Answer

Identify or define the following terms: economic entity,going concern.

Correct AnswerverifiedEconomic entity:All economic events can ...View AnswerShow 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

Which of the following is not a concern expressed by the SEC regarding IFRS adoption by the U.S.?

Correct AnswerverifiedShow Answer

Briefly describe how materiality is featured in the conceptual framework.

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

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) ? The Act:

Correct AnswerverifiedShow Answer

The asset/liability approach emphasizes:

Correct AnswerverifiedShow Answer

Use the following to answer questions The following information ($ in millions)comes from a recent annual report of Amazon.com,Inc.: -Compute the income before income tax for Amazon.

Correct AnswerverifiedNet income = Gross profit - Op...View AnswerShow Answer

Compute net income for the first year for Alpaca Corporation.

Correct AnswerverifiedShow Answer

The assumption that in the absence of contrary information a business entity will continue indefinitely is the:

Correct AnswerverifiedShow Answer

The FASB's framework for measuring fair value doesn't change the situations in which fair value is used under current GAAP.

Correct AnswerverifiedShow Answer

Use the following to answer questions The following information ($ in millions)comes from a recent annual report of Amazon.com,Inc.: -Compute Amazon's total liabilities at the end of the year.

Correct AnswerverifiedTotal assets = Total liabiliti...View AnswerShow Answer

With respect to the financial statements,what is the value of an audit?

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

Gains are:

Correct AnswerverifiedShow Answer

GAAP is an abbreviation for:

Correct AnswerverifiedShow Answer

Elements of financial statements do not include:

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 concep...View AnswerShow Answer

The matching principle is:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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If a country experiences severe inflatio...
View Answer

Correct Answer
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Correct Answer
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Economic entity:All economic events can ...
View Answer

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

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Correct Answer
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Net income = Gross profit - Op...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Total assets = Total liabiliti...
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Correct Answer
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Outside auditors add credibility to fina...
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
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