71 Test Bank for Intermediate Accounting 5th Edition
by Spiceland
Multiple Choice Questions
The FASB's conceptual framework's qualitative characteristics of
accounting information include:
1.

A. Full disclosure.

2.

B. Relevance.

3.

C. Going concern.

4.

D. Historical cost.

The International Accounting Standards Board:
1.

A. Was the predecessor to the IASC.

2.

B. Can overrule the FASB when their policies disagree.

3.

2.

B. The difficulties in measurement were too great.


3.

C. They have no authority in such situations.

4.

D. The SEC did not support the FASB position.

Which of the following is not a provision of the Public Company
Accounting Reform and Investor Protection Act of 2002?
1.

A. Corporate executive accountability.

2.

B. Auditor rotation.

3.

C. Retention of workpapers.

4.

D. All of these are provisions of the Act.


4.

D. Elements of financial statements.

Which of the following has the authority to set accounting
standards in the United States?
1.

A. FASB

2.

B. IRS

3.

C. SEC

4.

D. AICPA


The most recent example of the political process at work in
standard setting is the heated debate that occurred on the issue
of:
1.

A. Pension plan accounting.

D. Full disclosure.

Financial accounting information should provide information
about:
1.

A. Resources of an enterprise.

2.

B. Claims to resources.

3.

C. The effects of transactions that cause changes in resources.

4.

D. All of these.

Which of the following is not true about net operating cash flow?
1.

A. It is the difference between cash receipts and cash disbursements from
providing goods and services.

2.

B. It is a measure used in accrual accounting and is recognized as the best
predictor of future operating cash flows.

uses:
1.

A. Form 10-A.

2.

B. Form 10-K.

3.

C. Form 10-Q.

4.

D. Form S-1.

External decision makers would not look primarily to financial
accounting information to assist them in making decisions on:
1.

A. Granting credit.

2.

B. Capital budgeting.

3.

C. Selecting stocks.

2.

B. New resources are provided when shares of stock are sold by the
corporation to the initial owners.

3.

C. Transactions help to establish market prices for additional shares that
may be issued in the future.

4.

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.

The primary professional organization for those accountants
working in industry is the:
1.

A. AAA

2.

B. AICPA

3.

C. IIA


B. Were based on exposure drafts and public comment letters.

3.

C. Originated from congressional studies and SEC directives.


4.

D. Were the outcome of research studies and a theoretical framework.

CPAs are licensed by:
1.

A. The AICPA.

2.

B. The SEC.

3.

C. The federal government.

4.

D. State governments.

GAAP is an abbreviation for:
1.


4.

D. Changed the entity responsible for setting accounting standards.

The SEC issues accounting standards in the form of:
1.

A. Accounting Research Bulletins.

2.

B. Financial Reporting Releases.

3.

C. Financial Accounting Standards.

4.

D. Financial Technical Bulletins.


The most likely important flaw leading to the demise of the APB
was the perceived lack of:
1.

A. Confidence.

2.

The conceptual framework's qualitative characteristic of relevance
includes:
1.

A. Timeliness.

2.

B. Verifiability.

3.

C. Representational faithfulness.

4.

D. Neutrality.

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:
1.

A. Conservatism

2.

B. The matching principle

1.

A. Customers

2.

B. Suppliers

3.

C. Employees

4.

D. All of these are external users of financial statements.

Accounting standard setting has been characterized as:
1.

A. A political process.

2.

B. Using the scientific method.

3.

C. Pure deductive reasoning.

4.

B. Research and development.

3.

C. Cost of goods sold.

4.

D. Advertising.

The most political issue in the FASB's most recent deliberations
and pronouncements on business combinations was:
1.

A. The negative effects on subsequent earnings of amortizing goodwill if
firms were required to use the purchase method of accounting for the
combination.

2.

B. The negative effects on subsequent earnings of amortizing goodwill if
firms were required to use the pooling method of accounting for the
combination.

3.

C. The unrealistic balance sheet assets that would be created if firms were
required to use the purchase method of accounting for the combination.

4.


3.

C. Matching principle.


4.

D. Going concern assumption.

71 Free Test Bank for Intermediate Accounting 5th
Edition by Spiceland Multiple Choice Questions - Page
2
According to the conceptual framework, verifiability implies:
1.

A. Legal evidence.

2.

B. Logic.

3.

C. Consensus.

4.

D. Legal verdict.



4.

D. Collection has been made and warrantees have expired.

Surefeet Corporation changed its inventory valuation method.
Which characteristic is jeopardized by this change?
1.

A. Comparability.

2.

B. Representational faithfulness.

3.

C. Consistency.


4.

D. Feedback value.

Independent auditors express an opinion on the:
1.

A. Fairness of financial statements.

2.

business entity will continue indefinitely is the:
1.

A. Periodicity assumption.

2.

B. Entity assumption.

3.

C. Going concern assumption.

4.

D. Historical cost assumption.

Constraints on qualitative characteristics of accounting
information include:
1.

A. Timeliness.

2.

B. Going concern.

3.

C. Neutrality.

2.

B. Market approach.

3.

C. Cost-benefit approach.

4.

D. Income approach.

Elements of financial statements do not include:
1.

A. Monetary unit.

2.

B. Investments by owners.

3.

C. Comprehensive income.

4.

D. Losses.

Primecoat could get its annual financial statements two days

B. Document the source of financial statement facts, like literary footnotes.

3.

C. Are an integral part of a company's financial statements.

4.

D. Are irrelevant facts that are immaterial in amount.

Primary qualitative characteristics of accounting information are:
1.

A. Relevance and comparability.

2.

B. Comparability and consistency.

3.

C. Reliability and relevance.

4.

D. Reliability and consistency.

Gains are:
1.
2.


D. State laws.

Secondary qualitative characteristics of accounting information
include:


1.

A. Relevance and comparability.

2.

B. Comparability and consistency.

3.

C. Reliability and relevance.

4.

D. Reliability and consistency.

Net income equals:
1.

A. Assets minus liabilities.

2.


1.

A. About resources, obligations, and changes.

2.

B. To determine market values, assess profit potential, and evaluate
management.

3.

C. To assess the amounts and timing of prospective cash receipts.

4.

D. To make rational investment, credit, and similar decisions.

Mega Loan Company has very stringent credit requirements and,
accordingly, has negligible losses from uncollectible accounts.
The company's independent accountants did not protest when,
contrary to GAAP, the company recorded bad debt expense only


when specific accounts were determined to be uncollectible,
rather than use an allowance for uncollectible accounts. The
concept demonstrated is:
1.

A. Comparability.



Land was acquired in 2009 for a future building site at a cost of
$40,000. The assessed valuation for tax purposes is $27,000, a
qualified appraiser placed its value at $48,000, and a recent firm
offer for the land was for a cash payment of $46,000. The land
should be reported in the financial statements at:
1.

A. $40,000.

2.

B. $27,000.

3.

C. $46,000.

4.

D. $48,000.

The main issue in the debate over accounting for employee stock
options was:
1.

A. Which employees should receive options.

2.


statements on its web page, thereby reducing by ten days the
time to get information to investors and creditors. The qualitative
concept improved is:
1.

A. Comparability.

2.

B. Consistency.

3.

C. Relevance.

4.

D. Reliability.

If an independent auditing firm expresses dissatisfaction with a
company's financial statements, it issues:
1.

A. A qualified opinion.

2.

B. An unqualified opinion.

3.


A. The matching principle.

2.

B. The realization principle.

3.

C. The stable monetary unit assumption.

4.

D. The going concern assumption.

Change in equity from nonowner sources is:
1.

A. Comprehensive income.

2.

B. Revenues.

3.

C. Expenses.

4.



C. Representational faithfulness.

4.

D. Verifiability.

The best argument in support of historical cost information is:
1.

A. Relevance.

2.

B. Predictive quality for future cash flows.

3.

C. Materiality.

4.

D. Verifiability.

The matching principle is:
1.

A. A valuation method.

2.


D. All of these are correct.