,Intermediate Accounting, 3e (Gordon/Raedy/Sannella)
M! M! M!
Chapter 1 The Financial Reporting Environment
M! M! M! M!
1.1 Overview of Financial Reporting M! M! M!
1) The financial reporting process generates three basic financial stateme
M! M! M! M! M! M! M! M!
nts. Answer: FALSE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
2) The demand for financial information is based on market participant dem
M! M! M! M! M! M! M! M! M! M!
and. Answer: TRUE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
3) Managers of economic entities are best considered to be users of financial inform
M! M! M! M! M! M! M! M! M! M! M! M!
ation. Answer: FALSE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
4) Managers of economic entities are best considered to be preparers of financial inform
M! M! M! M! M! M! M! M! M! M! M! M!
ation. Answer: TRUE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly tr
M! M! M! M! M! M! M! M! M! M! M!
aded companies.
M!
Answer: TRUE M ! M !
Diff:M!2
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP
AACSB:M ! M ! ApplicationM!ofM!knowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded comp
M! M! M! M! M! M! M! M! M! M! M! M!
anies. Answer: FALSE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP
AACSB:M ! M ! ApplicationM!ofM!knowledge
1
Copyright © 2022 Pearson Education, In
M! M! M! M! M!
c.
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards
M! M! M! M! M! M! M! M! M! M!
and oversees the audits of public companies in the United States.
M! M! M! M! M! M! M! M! M! M! M!
Answer: FALSE M ! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP
AACSB:M ! M ! ApplicationM!ofM!knowledge
8) Financial accounting standards influence the behavior of managers and other internal
M! M! M! M! M! M! M! M! M! M! M!
users. Answer: TRUE
M! M !
Diff:M!2
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
9) Theories and procedures that evolve as a result of lobbying from various groups are exam
M! M! M! M! M! M! M! M! M! M! M! M! M! M!
ples of proactive factors within the legal, economic, political, and social environment.
M! M! M! M! M! M! M! M! M! M! M!
Answer: FALSE M ! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
10) Financial information includes information that is not governed by rules set forth by the acco
M! M! M! M! M! M! M! M! M! M! M! M! M! M!
unting standard-setting bodies.
M! M!
Answer: TRUE M ! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
11) What is the term that describes the process of identifying, measuring, and communicating fin
M! M! M! M! M! M! M! M! M! M! M! M! M!
ancial information about an economic entity to various user groups?
M! M! M! M! M! M! M! M! M!
A) financial reporting M!
B) accounting standard setting M! M!
C) financial statement M!
D) financial accountin M!
g Answer: D
M! M !
Diff:M!2
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
2
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M! M! M! M! M!
c.
, 12) Which element of financial accounting involves identifying the individuals who demand fin
M! M! M! M! M! M! M! M! M! M! M!
ancial information?
M!
A) financial information M!
B) economic entity M!
C) user groups
M!
D) legal, economic, political, and social environme
M! M! M! M! M!
nt Answer: C
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
13) Which of the following is not one of the four basic financial statements?
M! M! M! M! M! M! M! M! M! M! M! M!
A) balance sheet M!
B) trial balance
M!
C) cash flows statement
M! M!
D) statement of comprehensive incom
M! M! M!
e Answer: B
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
14) Which organization is responsible for promulgating U.S. GAAP?
M! M! M! M! M! M! M!
A) Financial Accounting Standards Board
M! M! M!
B) Public Company Accounting Oversight Board
M! M! M! M!
C) International Accounting Standards Board M! M! M!
D) Securities and Exchange Commissio
M! M! M!
n Answer: A
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
15) Which organization is responsible for setting auditing standards and overseeing the audits of
M! M! M! M! M! M! M! M! M! M! M! M! M!
public companies in the United States?
M! M! M! M! M!
A) Financial Accounting Standards Board
M! M! M!
B) Public Company Accounting Oversight Board
M! M! M! M!
C) American Institute of Certified Public Accountants
M! M! M! M! M!
D) Securities and Exchange Commissio
M! M! M!
n Answer: B
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP
AACSB:M ! M ! ApplicationM!ofM!knowledge
3
Copyright © 2022 Pearson Education, In
M! M! M! M! M!
c.
M! M! M!
Chapter 1 The Financial Reporting Environment
M! M! M! M!
1.1 Overview of Financial Reporting M! M! M!
1) The financial reporting process generates three basic financial stateme
M! M! M! M! M! M! M! M!
nts. Answer: FALSE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
2) The demand for financial information is based on market participant dem
M! M! M! M! M! M! M! M! M! M!
and. Answer: TRUE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
3) Managers of economic entities are best considered to be users of financial inform
M! M! M! M! M! M! M! M! M! M! M! M!
ation. Answer: FALSE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
4) Managers of economic entities are best considered to be preparers of financial inform
M! M! M! M! M! M! M! M! M! M! M! M!
ation. Answer: TRUE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly tr
M! M! M! M! M! M! M! M! M! M! M!
aded companies.
M!
Answer: TRUE M ! M !
Diff:M!2
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP
AACSB:M ! M ! ApplicationM!ofM!knowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded comp
M! M! M! M! M! M! M! M! M! M! M! M!
anies. Answer: FALSE
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP
AACSB:M ! M ! ApplicationM!ofM!knowledge
1
Copyright © 2022 Pearson Education, In
M! M! M! M! M!
c.
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards
M! M! M! M! M! M! M! M! M! M!
and oversees the audits of public companies in the United States.
M! M! M! M! M! M! M! M! M! M! M!
Answer: FALSE M ! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP
AACSB:M ! M ! ApplicationM!ofM!knowledge
8) Financial accounting standards influence the behavior of managers and other internal
M! M! M! M! M! M! M! M! M! M! M!
users. Answer: TRUE
M! M !
Diff:M!2
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
9) Theories and procedures that evolve as a result of lobbying from various groups are exam
M! M! M! M! M! M! M! M! M! M! M! M! M! M!
ples of proactive factors within the legal, economic, political, and social environment.
M! M! M! M! M! M! M! M! M! M! M!
Answer: FALSE M ! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
10) Financial information includes information that is not governed by rules set forth by the acco
M! M! M! M! M! M! M! M! M! M! M! M! M! M!
unting standard-setting bodies.
M! M!
Answer: TRUE M ! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
11) What is the term that describes the process of identifying, measuring, and communicating fin
M! M! M! M! M! M! M! M! M! M! M! M! M!
ancial information about an economic entity to various user groups?
M! M! M! M! M! M! M! M! M!
A) financial reporting M!
B) accounting standard setting M! M!
C) financial statement M!
D) financial accountin M!
g Answer: D
M! M !
Diff:M!2
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
2
Copyright © 2022 Pearson Education, In
M! M! M! M! M!
c.
, 12) Which element of financial accounting involves identifying the individuals who demand fin
M! M! M! M! M! M! M! M! M! M! M!
ancial information?
M!
A) financial information M!
B) economic entity M!
C) user groups
M!
D) legal, economic, political, and social environme
M! M! M! M! M!
nt Answer: C
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
13) Which of the following is not one of the four basic financial statements?
M! M! M! M! M! M! M! M! M! M! M! M!
A) balance sheet M!
B) trial balance
M!
C) cash flows statement
M! M!
D) statement of comprehensive incom
M! M! M!
e Answer: B
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
14) Which organization is responsible for promulgating U.S. GAAP?
M! M! M! M! M! M! M!
A) Financial Accounting Standards Board
M! M! M!
B) Public Company Accounting Oversight Board
M! M! M! M!
C) International Accounting Standards Board M! M! M!
D) Securities and Exchange Commissio
M! M! M!
n Answer: A
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP/IFRS
AACSB:M ! M ! ApplicationM!ofM!knowledge
15) Which organization is responsible for setting auditing standards and overseeing the audits of
M! M! M! M! M! M! M! M! M! M! M! M! M!
public companies in the United States?
M! M! M! M! M!
A) Financial Accounting Standards Board
M! M! M!
B) Public Company Accounting Oversight Board
M! M! M! M!
C) American Institute of Certified Public Accountants
M! M! M! M! M!
D) Securities and Exchange Commissio
M! M! M!
n Answer: B
M! M !
Diff:M!1
Objective:M ! 1.1M!IFRS/GA
AP:M ! GAAP
AACSB:M ! M ! ApplicationM!ofM!knowledge
3
Copyright © 2022 Pearson Education, In
M! M! M! M! M!
c.
