ACC 303 WEEK 5 MIDTERM EXAM
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ACC 303 WEEK 5 MIDTERM EXAM
ACC 303 Week 5 Midterm Exam – STR NEW
ACC 303 Week 5 Midterm Exam
TRUE-FALSE—Conceptual
1. Financial accounting is the process of identifying,
measuring, analyzing, and communicating financial information needed by
management to plan, evaluate, and control a company’s operations.
2. Financial statements are the principal means through
which a company communicates its financial information to those outside it.
3. Users of financial reports provided by a company use
that information to make their capital allocation decisions.
4. An effective process of capital allocation promotes
productivity and provides an efficient market for buying and selling securities
and obtaining and granting credit.
5. The objective of financial reporting is to provide
financial information about the reporting entity that is useful to present and
potential equity investors, but not to users who are not investors.
6. Investors are interested in financial reporting because
it provides information that is useful for making decisions
(decision-usefulness approach).
7. Users of financial accounting statements have both
coinciding and conflicting needs for information of various types.
8. The Securities and Exchange Commission appointed the
Committee on Accounting Procedure.
9. The passage of a new FASB Standards Statement requires
the support of five of the seven board members.
10. Financial Accounting Concepts set forth fundamental
objectives and concepts that are used in developing future standards of
financial accounting and reporting.
11. The AICPA created the Accounting Principles Board in
1959.
12. The FASB’s Codification integrates existing GAAP, and
creates new GAAP.
13. The AICPA’s Code of Professional Conduct requires that
members prepare financial statements in accordance with generally accepted
accounting principles.
14. GAAP is a product of careful logic or empirical
findings and are not influenced by political action.
15. The Public Company Accounting Oversight Board has
oversight and enforcement authority and establishes auditing and independence
standards and rules.
16. The expectations gap is caused by what the public
thinks accountants should do and what accountants think they can do.
17. Financial reports in the early 21st century did not
provide any information about a company’s soft assets (intangibles).
18. Accounting standards are now less likely to require
the recording or disclosure of fair value information.
19. U.S. companies that list overseas are required to use
International Financial Reporting Standards, issued by the International
Accounting Standards Board.
20. Ethical issues in financial accounting are governed by
the AICPA.
MULTIPLE CHOICE—Conceptual
21. General-purpose financial statements
are the product of
a. financial accounting.
b. managerial accounting.
c. both financial and managerial accounting.
d. neither financial nor managerial accounting.
22. Users of financial reports include
all of the following except
a. creditors.
b. government agencies.
c. unions.
d. All of these are users.
23. The financial statements most
frequently provided include all of the following except the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
24. The information provided by
financial reporting pertains to
a. individual business enterprises, rather than to
industries or an economy as a whole or to members of society as consumers.
b. business industries, rather than to individual
enterprises or an economy as a whole or to members of society as consumers.
c. individual business enterprises, industries, and
an economy as a whole, rather than to members of society as consumers.
d. an economy as a whole and to members of society
as consumers, rather than to individual enterprises or industries.
25. All the following are differences
between financial and managerial accounting in how accounting information is used
except to
a. plan and control company’s operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the
extent of a loan to grant.
d. All the above.
26. Which of the following represents a
form of communication through financial reporting but not through financial
statements?
a. Balance sheet.
b. President’s letter.
c. Income statement.
d. Notes to financial statements.
P27. The process of identifying,
measuring, analyzing, and communicating financial information needed by
management to plan, evaluate, and control an organization’s operations is
called
a. financial accounting.
b. managerial accounting.
c. tax accounting.
d. auditing.
28. How does accounting help the capital
allocation process attract investment capital?
a. Provides timely, relevant information.
b. Encourages innovation.
c. Promotes productivity.
d. a and b above.
29. Whether a business is successful and
thrives is determined by
a. markets.
b. free enterprise.
c. competition.
d. all of these.
30. An effective capital allocation
process
a. promotes productivity.
b. encourages innovation.
c. provides an efficient market for buying and
selling securities.
d. all of these.
31. Financial statements in the early
2000s provide information related to
a. nonfinancial measurements.
b. forward-looking data.
c. hard assets (inventory and plant assets).
d. none of these.
32. Which of the following is not a
major challenge facing the accounting profession?
a. Nonfinancial measurements.
b. Timeliness.
c. Accounting for hard assets.
d. Forward-looking information.
33. What is the objective of financial
reporting?
a. Provide information that is useful to management
in making decisions.
b. Provide information that clearly portray
nonfinancial transactions.
c. Provide information about the reporting entity
that is useful to present and potential equity investors, lenders, and other
creditors.
d. Provide information that excludes claims to the
resources.
34. Primary users for general-purpose
financial statements include
a. creditors.
b. employees.
c. investors.
d. both creditors and investors.
35. When making decisions, investors are
interested in assessing
a. the company’s ability to generate net cash
inflows.
b. management’s ability to protect and enhance the
capital providers’ investments.
c. Both a and b.
d. the company’s ability to generate net income.
36. Accrual accounting is used because
a. cash flows are considered less important.
b. it provides a better indication of ability to
generate cash flows than the cash basis.
c. it recognizes revenues when cash is received and
expenses when cash is paid.
d. none of the above.
37. Which perspective is adopted as part
of the objective of general-purpose financial reporting?
a. Decision-usefulness perspective.
b. Proprietary perspective.
c. Entity perspective.
d. Financial reporting perspective.
38. Accounting principles are “generally
accepted” only when
a. an authoritative accounting rule-making body has
established it in an official pro-nouncement.
b. it has been accepted as appropriate because of
its universal application.
c. both a and b.
d. neither a nor b.
39. A common set of accounting standards
and procedures are called
a. financial accounting standards.
b. generally accepted accounting principles.
c. objectives of financial reporting.
d. statements of financial accounting concepts.
40. Which of the following is a general
limitation of “general purpose financial statements”?
a. General purpose financial statements may not be
the most informative for a specific enterprise.
b. General purpose financial statements are
comparable.
c. General purpose financial statements are assumed
to present fairly the company’s financial operations.
d. None of the above.
41. What is the relationship between the
Securities and Exchange Commission and accounting standard setting in theUnited
States?
a. The SEC requires all companies listed on an
exchange to submit their financial statements to the SEC.
b. The SEC coordinates with the AICPA in
establishing accounting standards.
c. The SEC has a mandate to establish accounting
standards for enterprises under its jurisdiction.
d. The SEC reviews financial statements for
compliance.
42. What is due process in the context
of standard setting at the FASB?
a. FASB operates in full view of the public.
b. Public hearings are held on proposed accounting
standards.
c. Interested parties can make their views known.
d. All of the above.
43. Which of the following organizations
has been responsible for settingU.S.accounting standards?
a. Accounting Principles Board.
b. Committee on Accounting Procedure.
c. Financial Accounting Standards Board.
d. All of the above.
44. Why did the AICPA create the
Accounting Principles Board?
a. The SEC disbanded the previous standard setting
organization.
b. The previous standard setting organization did
not provide a structured set of accounting principles.
c. No such organization existed in the past.
d. None of the above.
45. Which organization was responsible
for issuing Accounting Research Bulletins?
a. Accounting Principles Board.
b. Committee on Accounting Procedure.
c. The SEC.
d. AICPA.
46. A characteristic of generally
accepted accounting principles include the following:
a. common set of standards and principles.
b. standards and principles are based federal
statutes.
c. acceptance requires an affirmative vote of
Certified Public Accountants.
d. practices that become accepted for at least a
year by all industry members.
47. Characteristics of generally
accepted accounting principles include all of the following except
a. authoritative accounting the rule-making body
established a principle of reporting.
b. standards are considered useful by the
profession.
c. each principle is approved by the SEC.
d. practice has become universally accepted over
time.
48. Why was it believed that accounting
standards that were issued by the Financial Accounting Standards Board would
carry more weight?
a. Smaller membership.
b. FASB board members are well-paid.
c. FASB board members must be CPAs.
d. Due process.
49. The passage of a new FASB Standards
Statement requires the support of
a. all Board members.
b. three Board members.
c. four Board members.
d. five Board members.
50. What is the purpose of Emerging
Issues Task Force?
a. Provide interpretation of existing standards.
b. Provide a consensus on how to account for new and
unusual financial transactions.
c. Provide interpretive guidance.
d. Provide timely guidance on select issues.
51. Which organization is responsible for
issuing Emerging Issues Task Force Statements?
a. FASB
b. CAP
c. APB
d. SEC
52. The role of the Securities and
Exchange Commission in the formulation of accounting principles can be best
described as
a. consistently primary.
b. consistently secondary.
c. sometimes primary and sometimes secondary.
d. non-existent.
53. 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
a. FASB.
b. AICPA.
c. SEC.
d. APB.
54. Companies that are listed on a stock
exchange are required to submit their financial statements to the
a. AICPA.
b. APB
c. FASB.
d. SEC.
55. The Financial Accounting Standards
Board (FASB) was proposed by the
a. American Institute of Certified Public
Accountants.
b. Accounting Principles Board.
c. Study Group on the Objectives of Financial
Statements.
d. Special Study Group on establishment of
Accounting Principles (Wheat Committee).
56. The Financial Accounting Standards
Board
a. has issued a series of pronouncements entitled
Statements on Auditing Standards.
b. was the forerunner of the current Accounting
Principles Board.
c. is the arm of the Securities and Exchange
Commission responsible for setting financial accounting standards.
d. is appointed by the Financial Accounting
Foundation.
57. The Financial Accounting Foundation
a. oversees the operations of the FASB.
b. oversees the operations of the AICPA.
c. provides information to interested parties on
financial reporting issues.
d. works with the Financial Accounting Standards
Advisory Council to provide informa-tion to interested parties on financial
reporting issues.
58. The major distinction between the
Financial Accounting Standards Board (FASB) and its predecessor, the Accounting
Principles Board (APB), is
a. the FASB issues exposure drafts of proposed
standards.
b. all members of the FASB are fully remunerated,
serve full time, and are independent of any companies or institutions.
c. all members of the FASB possess extensive
experience in financial reporting.
d. a majority of the members of the FASB are CPAs
drawn from public practice.
59. The Financial Accounting Standards
Board employs a “due process” system which
a. is an efficient system for collecting dues from
members.
b. enables interested parties to express their views
on issues under consideration.
c. identifies the accounting issues that are the
most important.
d. requires that all accountants must receive a copy
of financial standards.
60. Which of the following is not a publication of
the FASB?
a. Statements of Financial Accounting Concepts
b. Accounting Research Bulletins
c. Interpretations
d. Technical Bulletins
61. FASB Technical Bulletins
a. are similar to FASB Interpretations in that they
establish enforceable standards under the AICPA’s Code of Professional Ethics.
b. are issued monthly by the FASB to deal with
current topics.
c. 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.
d. were recently discontinued by the FASB because
they dealt with specialized topics having little impact on financial reporting
in general.
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