Ch.1 Questions With Complete Solutions!!!

Use financial statements to determine whether to conduct business or purchase products from a compnay - ANS suppliers and customers Use financial information to determine their market position relative to the reporting entity and to attempt to identify future strategies of the reporting entity - ANS Competitors Independent of the company and responsible for ensuring that management prepares and issues financial statements that comply with accounting standards and fairly present the financial position and economic performance of the company - ANS External Auditors Use financial information to review and analyze reported results of the companies they cover and make investment recommendations - ANS Financial Analysts Employees of the company serving in an advisory role to management. They provide information to management regarding the company's operations and proper functioning of its internal contorls - ANS Internal Auditors Review the financial statements of publicly traded companies for a variety of reason that are in the public interest - ANS Government Agencies Use financial information during negotiation of new labor agreements and compensation contracts - ANS Employee and labor union Support accounting professionals throughout their career by providing training, professional skills development, and other resources - ANS Professional Organizations Shareholders of the company - ANS equity investors Protect investors and oversee the accounting and auditing standard setting process - ANS Regulatory Bodies Pure principles-based standards (Characteristics) - ANS -Provide a clear discussion of the accounting objective related to the standard, -Involve few, if any, exceptions, -Involve no tests (referred to as bright-line tests) that require meeting a pre-established numerical threshold, -Provide insufficient guidance to implement the standard, and -Involve a significant amount of judgment in application. Rules-based standards (Characteristics) - ANS -May not relate to a consistent theoretical framework, -Contain numerous exceptions to the types of firms and industries that are covered by the standard, -Contain numerous bright-line tests, -Result in inconsistencies between standards, -Contain detailed application guidance, and thus- -Would not rely on extensive use of professional judgment. The length of a contract covers substantially all of the useful life of a plant asset. - ANS P the number of new common shares a firm issues is equal to 20% of the previously outstanding shares. - ANS R a corporation owns over 50% of the voting shares of an affiliate company - ANS R a corporation has the ability to control the operating and financial activities of an affiliate company. - ANS P it is more likely than not that a company's tax position will be sustained upon examination by the IRS - ANS P the sum of the undisclosed future cash flows from the use of a plant asset is less than its carrying value - ANS R