Intermediate Accounting 19th Edition By Earl K Stice James D Stice-Test Bank

Chapter 1—Financial Reporting

MULTIPLE CHOICE

1. One major constituent of the financial statements is not the:
a. auditor’s opinion
b. annual summary
c. explanatory notes
d. balance sheet

ANS: B PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

2. The users of accounting information encompass:
a. stakeholders
b. creditors
c. investors
d. all the previously mentioned

ANS: D PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

3. Past performance information concerning a company is received by interested parties through:
a. CEO’s
b. the SEC
c. financial reporting
d. financial news

ANS: C PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

4. The primary objective of financial reporting is to furnish information
a. that is beneficial for decision making.
b. about an entity’s assets, liabilities, and owners’ equity.
c. regarding an entity’s financial performance over a period.
d. which allows owners to evaluate management’s performance.

ANS: A PTS: 1 DIF: Easy OBJ: LO 5
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

5. Which among the subsequent is typically not a goal of financial reporting?
a. To offer information about an entity’s assets and claims against those assets
b. To present information that aids in assessing an entity’s sources and uses of cash
c. To provide information that assists in lending and investing decisions
d. To supply information about an entity’s liquidation value

ANS: D PTS: 1 DIF: Medium OBJ: LO 5
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

6. __________ accounting emphasizes the development and communication of financial information for external users.
a. management.
b. forensic
c. audit
d. financial

ANS: D PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

7. Crafting accounting information for internal use within a company is known as __________ accounting.
a. management
b. forensic
c. audit
d. financial

ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

8. The duty of reviewing the accountants’ work and issuing opinions on the fairness of the financial statements lies with
a. the external auditor.
b. the board of directors.
c. the internal auditors.
d. management.

ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

9. CPAs, functioning as independent (or external) auditors, are chiefly responsible for
a. preparing financial statements in accordance with GAAP.
b. certifying the correctness of financial statements.
c. expressing an opinion on the fairness of financial statements.
d. filing financial statements with the SEC.

ANS: C PTS: 1 DIF: Medium OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

10. An internal user of a company’s financial information typically includes
a. Board of directors
b. Shareholders in the company
c. Holders of the company’s bonds
d. Creditors with long-term contracts with the company

ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

11. In the year 1973, the subsequent private-sector entity was established to establish accounting standards in the United States:
a. the Financial Accounting Foundation.
b. the Securities and Exchange Commission.
c. the FASB
d. the Accounting Principles Board

ANS: C PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

12. The individuals of the __________ are chosen by the Financial Accounting Foundation.
a. American Accounting Association.
b. Financial Accounting Standards Board
c. Securities and Exchange Commission.
d. American Institute of Certified Public Accountants.

ANS: B PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

13. The FASB’s activities are supervised by the:
a. activities of the AICPA.
b. Financial Accounting Foundation
c. AAA.
d. financial reporting arm of the SEC.

ANS: B PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

14. A significant contrast between the Financial Accounting Standards Board (FASB) and its forerunner, the Accounting Principles Board (APB), is
a. all members of the FASB serve full time, receive a salary, and are independent of any public or private enterprises.
b. over 50 percent of the members of the FASB must be Certified Public Accountants.
c. the FASB distributes exposure drafts of proposed standards.
d. all members of the FASB hold experience in both public and corporate accounting.

ANS: A PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

15. Which of the following is a characteristic of the Financial Accounting Standards Board?
a. The FASB is comprised of five members.
b. FASB members must hail from CPA firms.
c. FASB members are part-time.
d. FASB members can retain their positions with previous employers.

ANS: A PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

16. Documents issued by the FASB include everything except
a. Statements of Financial Accounting Standards.
b. Interpretations of Statements of Financial Accounting Standards.
c. Statements of Financial Accounting Concepts.
d. Financial Reporting Releases.

ANS: D PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

17. The primary responsibility for GAAP and public reporting currently lies with the
a. SEC.
b. FASB.
c. Congress.
d. AICPA.

ANS: A PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

18. The role of the Emerging Issues Task Force (EITF) is to
a. release statements reflecting the EITF’s consensus on addressing new financial reporting issues where quick guidance is required.
b. conduct research on financial reporting issues addressed by the AICPA.
c. respond to groups lobbying the FASB on issues that impact a specific industry.
d. develop concept statements the AICPA can utilize as a frame of reference to solve future problems.

ANS: A PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

19. The usual sequence followed by the FASB in issuing its standards is
a. statement, discussion memorandum, opinion.
b. discussion memorandum, interpretation, exposure draft, statement.
c. exposure draft, discussion memorandum, statement.
d. discussion memorandum, exposure draft, statement.

ANS: D PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

20. Appropriate application of accounting principles relies most heavily on the
a. presence of specific guidelines.
b. oversight of regulatory bodies.
c. external audit function.
d. professional judgment of the accountant.

ANS: D PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Ethics