ANALYZED INTERMEDIATE ACCOUNTING CHAPTER 1-4

ANALYZED INTERMEDIATE ACCOUNTING CHAPTER 1-4 The statement of retained earnings is one of the financial statements most frequently provided by public companies. - CORRECT ANSWER -True. The financial statements most frequently provided by public companies include the balance sheet, the statement of cash flows, and the statement of stockholder's equity. Capital allocation is the process of determining how and at what cost money is allocated among competing interests. - CORRECT ANSWER -True. Capital allocation is the process of determining how and at what cost money is allocated among competing interests. Which of the following generally provides a better indication of an enterprise's present and continuing ability to generate favorable cash flows? - CORRECT ANSWER -Accrual basis accounting. Accounting principles are "generally accepted" only when: - CORRECT ANSWER -Authoritative accounting rule-making body has established it in an official pronouncement or over time it has been accepted as appropriate because of its universal application. The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as: - CORRECT ANSWER -Having sometimes primary and sometimes secondary roles in the formulation of accounting principles. Which of the following was established by the federal government to help develop and standardize financial information presented to stockholders? - CORRECT ANSWER -As a result of the call for greater regulation after the stock market crash of 1929, the federal government established the SEC to help develop and standardize financial information for stockholders. The first step taken in the establishment of a typical FASB statement is: - CORRECT ANSWER -A topic is identified and placed on the board's agenda. Financial Accounting Concepts are a major type of pronouncement issued by the FASB. - CORRECT ANSWER -Financial Accounting Concepts are one of the two major types of pronouncements issued by the FASB. Which of the following publications is not considered a GAAP document? - CORRECT ANSWER -The accounting research studies issued by the AICPA. Generally accepted accounting principles: - CORRECT ANSWER -Include detailed practices and procedures as well as broad guidelines of general application. Are influenced by pronouncements of the SEC and IRS. Change over time as the nature of the business environment changes. Politics play no role in establishing GAAP. - CORRECT ANSWER -GAAP is part of the real world, and it cannot escape politics and political pressures. All listed companies in the European Union use IFRS. - CORRECT ANSWER -Over 115 countries including those in the European Union use IFRS. From the four statements that follow, which are true? 1. Technical competence is not enough when encountering ethical decisions. 2. The pressures "to bend the rules," "to play the game," "to just ignore it" can be considerable. 3. Time, job, client, personal, and peer pressures do not complicate the process of ethical sensitivity and selection among alternatives. 4. The decision may be easier because there is no comprehensive ethical system to provide guidelines. - CORRECT ANSWER -1 and 2 are true, 3 and 4 are false, pressures complicate ethics as does the lack of guidelines.