Intermediate Accounting 10th Edition By J David Spiceland-Test Bank

Chapter 1 Environment and Theoretical Framework of Financial Accounting

1) Financial accounting’s main role is to supply relevant financial info to external parties of business enterprises.

Answer: TRUE
Difficulty: 1 Simple
Subject: Environment of financial accounting and reporting
Learning Aim: 01-01 Explain the function and key focus of financial accounting.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

2) Accrual accounting aims to measure revenues and expenses that took place during accounting periods so they equal net operating cash flow.

Answer: FALSE
Difficulty: 1 Simple
Subject: Cash versus accrual accounting
Learning Aim: 01-02 Describe the distinction between cash and accrual accounting.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: FN Measurement / Keyboard Navigation

3) The FASB is not the public-sector organization currently responsible for setting accounting standards in the United States.

Answer: FALSE
Difficulty: 1 Simple
Subject: Development of accounting and reporting standards
Learning Aim: 01-03 Define generally accepted accounting principles (GAAP) and talk about the historical evolution of accounting standards, including convergence between U.S. and international standards.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

4) The FASB’s due process welcomes various interested parties to express their opinions regarding whether financial accounting standards should be modified.

Answer: TRUE
Difficulty: 1 Simple
Subject: GAAP―Standard-setting process
Learning Aim: 01-04 Elaborate on why establishing accounting standards is depicted as a political process.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

5) The FASB faces significant political interference in accounting for stock-based compensation.

Answer: FALSE
Difficulty: 1 Simple
Subject: GAAP―Standard-setting process
Learning Aim: 01-04 Elucidate why establishing accounting standards is depicted as a political process.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

6) The Public Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) altered the entity in charge of setting standards for auditing public firms in the United States.

Answer: TRUE
Difficulty: 1 Simple
Subject: Encouraging high-quality financial reporting
Learning Aim: 01-05 Outline factors that encourage high-quality financial reporting.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

7) A principles-based approach to standard-setting prioritizes professional judgment over adhering to a list of rules.

Answer: FALSE
Difficulty: 1 Simple
Subject: Encouraging high-quality financial reporting
Learning Aim: 01-05 Examine factors that encourage high-quality financial reporting.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

8) Under federal securities laws, the SEC holds the power to define accounting standards in the United States.

Answer: TRUE
Difficulty: 1 Simple
Subject: Development of accounting and reporting standards
Learning Aim: 01-03 Define generally accepted accounting principles (GAAP) and discuss the historical evolution of accounting standards, including convergence between U.S. and global standards.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

9) The primary duty of properly applying GAAP when communicating with investors and creditors via financial statements lies with a firm’s auditors.

Answer: FALSE
Difficulty: 1 Simple
Subject: Encouraging high-quality financial reporting
Learning Aim: 01-05 Elucidate factors that encourage high-quality financial reporting.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

10) Auditors play a crucial part in the resource allocation process by enhancing credibility to financial statements.

Answer: TRUE
Difficulty: 1 Simple
Subject: Encouraging high-quality financial reporting
Learning Aim: 01-05 Elucidate factors that encourage high-quality financial reporting.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

11) The goal of the conceptual framework is to provide a structure and framework for a uniform set of GAAP.

Answer: TRUE
Difficulty: 1 Simple
Subject: Conceptual framework―Purpose
Learning Aim: 01-06 Explain the purpose of the conceptual framework.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

12) The conceptual framework indicates GAAP in the absence of a more specific accounting standard in the United States.

Answer: FALSE
Difficulty: 1 Simple
Subject: Conceptual framework―Purpose
Learning Aim: 01-06 Elucidate the purpose of the conceptual framework.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation