(Test Bank) Intermediate Accounting

Spiceland, 11

Business

Test Bank

11th Edition

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Test Bank for Intermediate Accounting, The downloadable file consists of 197 pages, and the total size of the file is 0.95 MB. Purchase now only for highly discounted price.

Author(s): Spiceland

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Version 1 1 Chapter 1 (1) 1) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct number code for the term. TERM PHRASE Term number that matches the phrase. 1. Predictive value Information is use ful in projecting cash flows. ____ 2. Relevance Pertinent to the decision at hand. ____ 3. Distribution to owners Information is available prior to the decision. ____ 4. Confirmatory value Decrease in equity due to transfers to owners. ____ 5. Timeliness Information confirms expectations. ____ Get all chapters test bank download link below https://www.mediafire.com/file/ijnh4ib 58rvvzid/TB+Intermediate+Accounting,+ 11e++David+Spiceland.zip/file Version 1 2 2) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct number code for the term. TERM PHRASE Term number that matches the phrase. 1. Gain Along with relevance, a fundamental decision -specific quality. ____ 2. Materiality Results if an asset is sold for more than book value. ____ 3. Completeness Contains all information necessary for faithful representation. ____ 4. Comprehensive income The change in equity from nonowner transactions. ____ 5. Faithful representation Concerns the decision -making impact of both the amount and nature of an item. ____ Version 1 3 3) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct number code for the term. TERM PHRASE Term number that matches the phrase. 1. Neutrality Important in analysis between firms. ____ 2. Comparability Accounting information should be unbiased. ____ 3. Consistency The decision to include an amount in the financial statements. ____ 4. Cost- effectiveness Applying the same accounting practices over time. ____ 5. Recognition Considers the value of using information relative to cost of providing it. ____ Version 1 4 4) Listed below are five terms are followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct number code for the term. TERM PHRASE Term number that matches the phrase. 1. Monetary unit assumption Implies consensus among different observers. ____ 2. Verifiability Assumes all transactions can be identified with a particular entity. ____ 3. Economic entity assumption Assumes an entity will continue to operate indefinitely. ____ 4. Going concern assumption Requires reporting the financial life of an entity in discrete time frames. ____ 5. Periodicity assumption Ignores the possibility of inflation. ____ Version 1 5 5) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct number code for the term. TERM PHRASE Term number that matches the phrase. 1. Historical cost Basis of measurement for fixed assets. ____ 2. Materiality Discounts future cash flows. ____ 3. Revenue recognition Occurs when goods or services are transferred to the customer. ____ 4. Full disclosure Reporting of all information that could affect decisions. ____ 5. Present value Application of GAAP sometimes avoided under this constrain t. ____ Version 1 6 6) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct number code for the term. TERM PHRASE Term number that matches the phrase. 1. Financial Accounting Standards Board Undermines representational faithfulness by being inconsistent with neutrality. ____ 2. Accounting Principles Board It established GAAP before the FASB. ____ 3. Conservatism Its EITF Issues are GAAP when entered in the Accounting Standards Codification. ____ 4. American Institute of CPAs (AICPA) It has the authority to set U.S. accounting standards. ____ 5. Securities and Exchange Commission It is the national organization for CPAs in the United States. ____ Version 1 7 7) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct number code for the term. TERM PHRASE Term number that matches the phrase. 1. Expenses Net assets. ____ 2. Equity Outflows of resources to generate revenues. ____ 3. Distributions to owners Cash dividends. ____ 4. Investments by owners Claims of creditors against the assets of a business. ____ 5. Liabilities Transfers of resources in exchange for common and preferred stock. ____ Version 1 8 8) Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct number code for the term. TERM PHRASE Term number that matches the phrase. 1. Losses Net outflows from peripheral transactions. ____ 2. Assets Increases in equity from the sale of goods and/or services. ____ 3. Revenues Results if an asset is sold for more than book value. ____ 4. Comprehensive income All changes in equity except owner transactions. ____ 5. Gains Probable future economic benefits controlled by an entity. ____ Version 1 9 9) Listed below are 10 organizations followed by a list of phrases that describe or characterize the organizations. Match each phrase with the correct organization by placing the number designating the best term in the space provided by the phrase. TERM PHRASE Term number that matches the phrase. 1. SEC Establishes auditing standards in the U.S. for public companies. ____ 2. FASB Primary national organization of accountants working in industry. ____ 3. IASB Sets accounting standards in the United States. ____ 4. AICPA Provides timely responses to financial reporting issues. ____ 5. EITF The FASB's parent organization. ____ 6. PCAOB Advises the FASB. ____ 7. IMA FASB's predecessor. ____ 8. FASAC Regulates the financial reporting for public companies. ____ 9. APB National organization of certified public accountants. ____ 10. FAF Sets global accounting standards. ____ 10) Compare net income (loss) for the year to net cash flow from operating activities. Why are these amounts different? Briefly explain. Version 1 10 11) For each of the following situations, state whether you agree or disagree with the financial reporting practice employed, and briefly explain the reason for your answer. 1. Cantor Corporation's accountant increased the book value of a patent from its original cost of $1 million to its recently appraised value of $6 million . 2. Stanton Corporation paid for the personal travel of its chief financial officer and charged travel expense. 3. At the end of its 2021 fiscal year, Dower, Incorporated, received an order from a customer for $60,000. The merchandise will ship early in 2022. B ecause the sale was made to a long -time customer and the invoice was paid in 2021, the controller recorded the sale in 2021. 4. In the middle of its 2021 fiscal year, Sanguinetti, Incorporated paid $12,000 to its insurance company for one -year comprehensive i nsurance coverage. Sanguinetti recorded the entire expenditure as an expense in 2021. 5. The Churchill Pharmaceutical Company included a note in its financial statements that described a pending lawsuit against the company. 6. The Daily Corporation, a company wh ose securities are publicly traded, prepares monthly, quarterly, and annual financial statements for internal use but disseminates to external users only the annual financial statements. 12) Identify or define the following terms: economic entity, going concern. 13) List the four financial statements most frequently provided to external users. Version 1 11 14) Explain and show an example of how the FASB's conceptual framework is needed in formulating standards on controversial topics. 15) What is the SEC and how is it involved with accounting standard -setting? 16) What is the EITF and what is its purpose? 17) Accounting standard -setting has been characterized as a political process. Discuss this proposition giving an example. 18) What are the key provisi ons of the Public Company Accounting Reform and Investor Protection (Sarbanes -Oxley) Act of 2002? Version 1 12 19) What is the value of a company having financial statements audited by an independent auditor? 20) What responsibilities do auditors have with r espect to reporting critical audit matters (CAMs)? 21) Briefly describe how materiality is featured in the conceptual framework. 22) What are the fundamental qualitative characteristics that are necessary for financial information to be useful, according to the FASB ’s conceptual framework? Define each, including their key components or aspects. 23) Give an example of a violation of the stable monetary unit assumption. How would it affect the quality of financial statement information? Version 1 13 24) Identify or define the following terms: periodicity, monetary unit. 25) Identify or define the following term: historical cost. 26) How does GAAP define fair value? 27) Over time, accounting standards have developed to reflect changes in the business wo rld as well as changes in our ability to account for such changes. Using the example of marking assets and liabilities to their fair value, explain why you would expect accounting standards to change. 28) List and briefly describe the five measurement at tributes used commonly in current GAAP. Version 1 14 29) List and briefly describe the three levels of inputs described in the fair value measurement hierarchy. 30) Contrast the asset/liability and revenue/expense approaches to accounting standard setting. 31) Contrast the role of the conceptual framework in U.S. GAAP and IFRS. Version 1 15 Answer Key Test name: ch 1 (1) 1) Essay 2) Essay 3) Essay 4) Essay 5) Essay 6) Essay 7) Essay 8) Essay 9) Essay 10) Essay 11) Essay 12) Essay 13) Essay 14) Essay 15) Essay 16) Essay 17) Essay 18) Essay 19) Essay 20) Essay 21) Essay 22) Essay 23) Essay 24) Essay 25) Essay 26) Essay 27) Essay 28) Essay 29) Essay 30) Essay 31) Essay Version 1 1 Chapter 1(2) 1) External decision makers would not look primarily to financial accounting information to assist them in making decisions relating to: A) Making loans to the company. B) Compensation of company executives. C) The purchase of stocks and bonds. D) Estimates of the potential for future profits. 2) The primary focus for financial accounting information is to provide information useful for: Investing decisions Credit decisions a. Yes Yes b. Yes No c. No Yes d. No No A) Option a B) Option b C) Option c D) Option d 3) Which of the following groups is not among the external users for whom financial statements are prepared? A) Customers B) Suppliers C) Employees D) Customers, suppliers, and employees are all external users of financial statements 4) 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, it may not be indicative of long -run cash -generating ability. D) It is easy to understand and all information required to measure it is factual. Version 1 2 5) Which of the following groups is not among financial intermediarie s? A) Mutual fund managers B) Financial analysts C) CPAs D) Credit rating organizations 6) An investor provides a company with $120,000 of cash by purchasing stock at the end of 2022, receives $1,400 of dividends from the company during 2023, and sells the ownership interest at the end of 2023 for $146,200. What is the rate of return that will be generated for 2023? A) 1% B) 22% C) Cannot be determined from the information supplied. D) 23% 7) An investor provides a company with $100,000 of cash by purchasing stock at the end of 2022, receives $1,000 of dividends from the company during 2023, and sells the ownership interest at the end of 2023 for $120,000. What is the rate of return that will be generated for 2023? A) 1% B) 20% C) 21% D) Cannot be determined from the information supplied. 8) 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 D) AICPA Version 1 3 9) Which of the following does not provid e guidance about GAAP for companies that are publicly listed on a stock exchange? A) FASB B) IASB C) GASB D) EITF 10) Porite Company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash. Porite's practice is an example of: A) Cash basis accounting. B) Accrual accounting. C) The matching principle. D) Economic entity. 11) Which of the following is not a potential benefit of accrual accounting, compared to cash - basis accounting? A) Timeliness B) Better reflecting economic activity C) Periodicity D) Better matching of revenues and expenses 12) 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 of: A) Conservatism. B) Matching. C) Revenue recognition. D) Economi c entity. Version 1 4 13) 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. 14) The FASB issues accounting standards in the for m of: A) Accounting Research Bulletins. B) Accounting Standards Updates. C) Financial Accounting Standards. D) Financial Technical Bulletins. 15) Pronouncements issued by the Committee on Accounting Procedures: 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. 16) The FASB's standard -setting process includes, in the correct o rder: A) Exposure draft, research, discussion paper, Accounting Standards Update. B) Research, exposure draft, discussion paper, Accounting Standards Update. C) Research, discussion paper, exposure draft, Accounting Standards Update. D) Discussion paper, research, exp osure draft, Accounting Standards Update. 17) 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) Requires rotation of the lead partner on an audit every five years. B) Increased accountability of corporate executives. C) Regulates the types of non -audit services that can be performed by auditors for audit clients. D) Changed the entity responsible for setting accounting standards. Version 1 5 18) CPAs are licensed by: A) The AICPA. B) The SEC. C) The federal government. D) State governments. 19) Which of the following has the statutory authority to set accounting standards in the United States? A) FASB B) IRS C) SEC D) AICPA 20) 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. 21) The most likely important flaw leading to the demise of the APB was the perceived lack of: A) Confidence. B) Competence. C) Independence. D) Importance. 22) Accounting standard -setting has been characterized as: A) A political process. B) Using the scientific method. C) Pure deductive reasoning. D) Pure inductive reasoning. Version 1 6 23) The International Accounting Standards Board: A) Was the predecessor to the IASC. B) Can overrule the FASB when their policies disagree. C) Promotes the use of high -quality, understanda ble global accounting standards. D) Has its headquarters in Geneva. 24) Which of the following is not a provision of the Public Company Accounting Reform and investor Protection Act of 2002? A) Corporate executive accountability B) Auditor rotation C) Reporting on adequacy of internal controls D) All of these answer choices are correct. 25) The primary professional organization for those accountants working in industry is the: A) AAA. B) AICPA. C) IIA. D) IMA. 26) Regarding convergence of accounting standards, the FASB and IASB: A) Have agreed to combine their organizations to form the BUSYB. B) Have achieved full convergen ce with respect to financial instruments. C) Do not intend to work together to achieve convergence where possible. D) Are not likely to achieve full convergence of accounting standards in the near future. 27) Which of the following is not a concern regarding IFRS adoption by the U.S.? A) Need for the U.S. to have strong influence on the standard -setting process and ensure that standards meet U.S. needs. B) Geographic dispersion of standard setters makes it unlikely that boards can interact to achieve consensus. C) The high costs to companies of converting to IFRS. D) The fact that many laws, regulations and private contracts reference U.S. GAAP. Version 1 7 28) The most political issue in the FASB's deliberations and amendments to GAAP with respect to accounting for employee stock options wa s: A) The negative effects (especially on the earnings of high -tech companies) if they had to recognize compensation expense in an amount equal to the fair value of the options. B) The negative effects on assets of recognizing options -related compensation expense in equity. C) The disclosure of options -related compensation expense in the notes to the financial statements. D) Accounting for options -related compensation expense relating to options that have not yet been granted to employees. 29) The private sector has sometimes been forced to change accounting standards because the: A) Cost of gathering data to comply with a given standard was prohibitive. B) Difficulties in measurement required by the standard were too great. C) Profit -oriented companies withdrew financial support for the private sector body that set the standards. D) SEC did not agree with a particular standard issued by the private sector. 30) The most recent example of the political process at work in standa rd-setting is the controversy surrounding the: A) Creation of the FASB. B) Accounting for employee stock options. C) FASB Accounting Standards Codification. D) Implementation of the fair value standard. 31) Independent auditors express an opinion on the: A) Fairness of fin ancial statements. B) Accuracy of financial statements. C) Soundness of a company's future. D) Quality of a company's management. Version 1 8 32) The possibility that the capital markets' focus on periodic profits may tempt a company's management to bend or even break accounting rules to inflate reported net income is an example of: A) An ethical dilemma. B) An accounting theory issue. C) A technical accounting issue. D) An auditor's responsibility to inform the SEC. 33) One of the elements that many believe distinguishes a profession from other occupations is the acceptance of responsibility by its members for the interests of those it serves, which is often articulated in: A) Its conceptual framework. B) Its code of ethics. C) Federal laws. D) State laws. 34) The motivati on to behave ethically should come from: A) Within oneself. B) Fear of penalties for violating professional codes. C) Codes of ethics. D) Frameworks for resolving ethical dilemmas. 35) SFAC 8 of the conceptual framework focuses on: A) Objective and qualitative characterist ics. B) Presentation and disclosure. C) Recognition and measurement. D) Elements of financial statements. 36) The FASB's conceptual framework's qualitative characteristics of accounting information include: A) Historical cost. B) Realization. C) Faithful representation. D) Full disclosure. Version 1 9 37) The FASB's conceptual framework's qualitative characteristics of accounting information include: A) Full disclosure. B) Relevance. C) Going concern. D) Historical cost. 38) The conceptual framework's qualitative characteristic of relevance includes: A) Predictive value. B) Verifiability. C) Completeness. D) Neutrality. 39) The conceptual framework's qualitative characteristic of faithful representation includes: A) Predictive value. B) Neutrality. C) Confirmatory value. D) Timeliness. 40) SFAC No.5 focuses on: A) Objectives of financial reporting. B) Qualitative characteristics of accounting information. C) Recognition and measurement concepts in accounting. D) Elements of financial statements. 41) The main issue in the debate over accounting for employee stock o ptions was: A) Which employees should receive options. B) The amount of compensation expense that a company should recognize. C) How many options should be granted to key executives. D) The tax consequences of employee stock options.