26. External decision makers would not look primarily
to financial accounting information to assist them in making decisions
A. Granting credit.
B. Capital budgeting.
C. Selecting stocks.
D. Mergers and acquisitions.
27. Corporations issue their shares to the investing
public in the:
A. Option A
B. Option B
C. Option C
D. Option D
28. The primary focus for financial accounting
information is to provide information useful for:
A. Option A
B. Option B
C. Option C
D. Option D
29. Which of the following is not true about
net operating cash flow?
A. It is the difference between cash receipts and cash disbursements from
providing goods and services.
B. It is a measure used in accrual accounting and is recognized as the
best predictor of future operating cash flows.
C. Over short periods of time, it may not be indicative of long-run
D. It is easy to understand and all information required to measure it is
30. Which of the following groups is not among
A. Mutual fund managers
B. Financial analysts
D. Credit rating organizations
31. Which of the following was the first private
sector entity that set accounting standards in the United States?
A. Accounting Principles Board
B. Committee on Accounting Procedure
C. Financial Accounting Standards Board
32. Which of the following does not apply to
A. Transactions are important to the efficient allocation of resources in
B. New resources are provided when shares of stock are sold by the
corporation to the initial owners.
C. Transactions help to establish market prices for additional shares that
may be issued in the future.
D. Many investors might be unwilling to provide resources to corporations
if there is no available mechanism for the future sale of their stocks and
bonds to others.
33. A cause-and-effect relationship is implicit in
A. Realization principle.
B. Historical cost principle.
C. Matching principle.
D. Going concern assumption.
34. The full disclosure principle requires a balance
A. Comparability and consistency.
B. Relevance and cost effectiveness.
C. Reliability and neutrality.
D. Timeliness and predictive value.
35. Which of the following groups is not among the
external users for whom financial statements are prepared?
D. All of the above are external users of financial statements.
36. In a recent annual report, Apple Computer reported
the following in one of its disclosure notes: “Warranty Expense: The
Company provides currently for the estimated cost for product warranties at the
time the related revenue is recognized.” This note exemplifies Apple’s use
B. The matching principle
C. Realization principle
D. Economic entity
37. GAAP is an abbreviation for:
A. Generally authorized accounting procedures.
B. Generally applied accounting procedures.
C. Generally accepted auditing practices.
D. Generally accepted accounting principles.
38. The SEC issues accounting standards in the form
A. Accounting Research Bulletins.
B. Financial Reporting Releases.
C. Financial Accounting Standards.
D. Financial Technical Bulletins.
39. Pronouncements issued by the Committee on
A. Dealt with specific accounting and reporting problems.
B. Were based on exposure drafts and public comment letters.
C. Originated from congressional studies and SEC directives.
D. Were the outcome of research studies and a theoretical framework.
40. The FASB’s standard-setting process includes, in
the correct order:
A. Exposure draft, research, discussion paper, Accounting Standards
B. Research, exposure draft, discussion paper, Accounting Standards
C. Research, discussion paper, exposure draft, Accounting Standards
D. Discussion paper, research, exposure draft, Accounting Standards
41. Which of the following is not a provision
of the Public Company Accounting Reform and Investor Protection Act of 2002
(Sarbanes-Oxley)? The Act:
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
D. Changed the entity responsible for setting accounting standards.
42. CPAs are licensed by:
A. The AICPA.
B. The SEC.
C. The federal government.
D. State governments.
43. A firm’s comprehensive income always:
A. Is the same as its net income.
B. Is greater than its net income.
C. Is less than its net income.
D. Could be greater than or less than net income.
44. Which of the following has the authority to set
accounting standards in the United States?
45. The most likely important flaw leading to the
demise of the APB was the perceived lack of:
46. Accounting standard setting has been characterized
A. A political process.
B. Using the scientific method.
C. Pure deductive reasoning.
D. Pure inductive reasoning.
47. The International Accounting Standards
A. Was the predecessor to the IASC.
B. Can overrule the FASB when their policies disagree.
C. Promotes the use of high-quality, understandable global accounting
D. Has its headquarters in Geneva.
48. The most political issue in the FASB’s most recent
deliberations and amendments to GAAP on business combinations was:
A. The negative effects on subsequent earnings of amortizing goodwill if
firms were required to use the purchase method of accounting for the
B. The negative effects on subsequent earnings of amortizing goodwill if
firms were required to use the pooling method of accounting for the
C. The unrealistic balance sheet assets that would be created if firms
were required to use the purchase method of accounting for the combination.
D. The unrealistic balance sheet assets that would be created if firms
were required to use the pooling method of accounting for the combination.
49. Which of the following is not a provision
of the Public Company Accounting Reform and Investor Protection Act of
A. Corporate executive accountability.
B. Auditor rotation.
C. Retention of workpapers.
D. All of the above are provisions of the Act.
50. When a registrant company submits its annual
filing to the SEC, it uses:
A. Form 10-A.
B. Form 10-K.
C. Form 10-Q.
D. Form S-1.
51. The primary professional organization for those
accountants working in industry is the:
52. The primary historical reason for the FASB
reversing its positions when political pressures occur is:
A. The cost of gathering data was prohibitive.
B. The difficulties in measurement were too great.
C. They have no authority in such situations.
D. The SEC did not support the FASB position.
53. The most recent example of the political process
at work in standard setting is the heated debate that occurred on the issue
A. Pension plan accounting.
B. Accounting for posteretirement benefits other than pensions.
C. Accounting for business combinations.
D. Accounting for stock-based compensation.
54. The recognition of which of the following expenses
exemplifies the application of the matching principle?
A. President’s salary.
B. Research and development.
C. Cost of goods sold.
55. The FASB’s conceptual framework’s qualitative
characteristics of accounting information include:
A. Historical cost.
C. Faithful representation.
D. Full disclosure.