,Intermediate Accounting, 3e (Gordon/Raedy/Sannella)
xx xx xx
Chapter 1 The Financial Reporting Environment
xx xx xx xx
1.1 Overview of Financial Reporting xx xx xx
1) The financial reporting process generates three basic financial statemen
xx xx xx xx xx xx xx xx
ts. Answer: FALSE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
2) The demand for financial information is based on market participant dema
xx xx xx xx xx xx xx xx xx xx
nd. Answer: TRUE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
3) Managers of economic entities are best considered to be users of financial informat
xx xx xx xx xx xx xx xx xx xx xx xx
ion. Answer: FALSE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
4) Managers of economic entities are best considered to be preparers of financial informat
xx xx xx xx xx xx xx xx xx xx xx xx
ion. Answer: TRUE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly tra
xx xx xx xx xx xx xx xx xx xx xx
ded companies.
xx
Answer: TRUE x x x x
Diff:xx2
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP
AACSB:x x x x Applicationxxofxxknowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded compan
xx xx xx xx xx xx xx xx xx xx xx xx
ies. Answer: FALSE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP
AACSB:x x x x Applicationxxofxxknowledge
1
Copyright © 2022 Pearson Education, Inc
xx xx xx xx xx
.
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards
xx xx xx xx xx xx xx xx xx xx xx
and oversees the audits of public companies in the United States.
xx xx xx xx xx xx xx xx xx xx
Answer: FALSE x x x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP
AACSB:x x x x Applicationxxofxxknowledge
8) Financial accounting standards influence the behavior of managers and other internal us
xx xx xx xx xx xx xx xx xx xx xx
ers. Answer: TRUE
xx x x
Diff:xx2
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
9) Theories and procedures that evolve as a result of lobbying from various groups are exampl
xx xx xx xx xx xx xx xx xx xx xx xx xx xx
es of proactive factors within the legal, economic, political, and social environment.
xx xx xx xx xx xx xx xx xx xx xx
Answer: FALSE x x x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
10) Financial information includes information that is not governed by rules set forth by the accou
xx xx xx xx xx xx xx xx xx xx xx xx xx xx
nting standard-setting bodies.
xx xx
Answer: TRUE x x x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
11) What is the term that describes the process of identifying, measuring, and communicating fina
xx xx xx xx xx xx xx xx xx xx xx xx xx
ncial information about an economic entity to various user groups?
xx xx xx xx xx xx xx xx xx
A) financial reporting xx
B) accounting standard setting xx xx
C) financial statement xx
D) financial accounting xx
Answer: D
xx x x
Diff:xx2
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
2
Copyright © 2022 Pearson Education, Inc
xx xx xx xx xx
.
, 12) Which element of financial accounting involves identifying the individuals who demand finan
xx xx xx xx xx xx xx xx xx xx xx
cial information?
xx
A) financial information xx
B) economic entity xx
C) user groups xx
D) legal, economic, political, and social environme
xx xx xx xx xx
nt Answer: C
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
13) Which of the following is not one of the four basic financial statements?
xx xx xx xx xx xx xx xx xx xx xx xx
A) balance sheet xx
B) trial balance xx
C) cash flows statement
xx xx
D) statement of comprehensive incom xx xx xx
e Answer: B
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
14) Which organization is responsible for promulgating U.S. GAAP?
xx xx xx xx xx xx xx
A) Financial Accounting Standards Board xx xx xx
B) Public Company Accounting Oversight Board
xx xx xx xx
C) International Accounting Standards Board xx xx xx
D) Securities and Exchange Commissio xx xx xx
n Answer: A
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
15) Which organization is responsible for setting auditing standards and overseeing the audits of p
xx xx xx xx xx xx xx xx xx xx xx xx xx
ublic companies in the United States?
xx xx xx xx xx
A) Financial Accounting Standards Board xx xx xx
B) Public Company Accounting Oversight Board
xx xx xx xx
C) American Institute of Certified Public Accountants
xx xx xx xx xx
D) Securities and Exchange Commissio xx xx xx
n Answer: B
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP
AACSB:x x x x Applicationxxofxxknowledge
3
Copyright © 2022 Pearson Education, Inc
xx xx xx xx xx
.
xx xx xx
Chapter 1 The Financial Reporting Environment
xx xx xx xx
1.1 Overview of Financial Reporting xx xx xx
1) The financial reporting process generates three basic financial statemen
xx xx xx xx xx xx xx xx
ts. Answer: FALSE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
2) The demand for financial information is based on market participant dema
xx xx xx xx xx xx xx xx xx xx
nd. Answer: TRUE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
3) Managers of economic entities are best considered to be users of financial informat
xx xx xx xx xx xx xx xx xx xx xx xx
ion. Answer: FALSE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
4) Managers of economic entities are best considered to be preparers of financial informat
xx xx xx xx xx xx xx xx xx xx xx xx
ion. Answer: TRUE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly tra
xx xx xx xx xx xx xx xx xx xx xx
ded companies.
xx
Answer: TRUE x x x x
Diff:xx2
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP
AACSB:x x x x Applicationxxofxxknowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded compan
xx xx xx xx xx xx xx xx xx xx xx xx
ies. Answer: FALSE
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP
AACSB:x x x x Applicationxxofxxknowledge
1
Copyright © 2022 Pearson Education, Inc
xx xx xx xx xx
.
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards
xx xx xx xx xx xx xx xx xx xx xx
and oversees the audits of public companies in the United States.
xx xx xx xx xx xx xx xx xx xx
Answer: FALSE x x x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP
AACSB:x x x x Applicationxxofxxknowledge
8) Financial accounting standards influence the behavior of managers and other internal us
xx xx xx xx xx xx xx xx xx xx xx
ers. Answer: TRUE
xx x x
Diff:xx2
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
9) Theories and procedures that evolve as a result of lobbying from various groups are exampl
xx xx xx xx xx xx xx xx xx xx xx xx xx xx
es of proactive factors within the legal, economic, political, and social environment.
xx xx xx xx xx xx xx xx xx xx xx
Answer: FALSE x x x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
10) Financial information includes information that is not governed by rules set forth by the accou
xx xx xx xx xx xx xx xx xx xx xx xx xx xx
nting standard-setting bodies.
xx xx
Answer: TRUE x x x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
11) What is the term that describes the process of identifying, measuring, and communicating fina
xx xx xx xx xx xx xx xx xx xx xx xx xx
ncial information about an economic entity to various user groups?
xx xx xx xx xx xx xx xx xx
A) financial reporting xx
B) accounting standard setting xx xx
C) financial statement xx
D) financial accounting xx
Answer: D
xx x x
Diff:xx2
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
2
Copyright © 2022 Pearson Education, Inc
xx xx xx xx xx
.
, 12) Which element of financial accounting involves identifying the individuals who demand finan
xx xx xx xx xx xx xx xx xx xx xx
cial information?
xx
A) financial information xx
B) economic entity xx
C) user groups xx
D) legal, economic, political, and social environme
xx xx xx xx xx
nt Answer: C
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
13) Which of the following is not one of the four basic financial statements?
xx xx xx xx xx xx xx xx xx xx xx xx
A) balance sheet xx
B) trial balance xx
C) cash flows statement
xx xx
D) statement of comprehensive incom xx xx xx
e Answer: B
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
14) Which organization is responsible for promulgating U.S. GAAP?
xx xx xx xx xx xx xx
A) Financial Accounting Standards Board xx xx xx
B) Public Company Accounting Oversight Board
xx xx xx xx
C) International Accounting Standards Board xx xx xx
D) Securities and Exchange Commissio xx xx xx
n Answer: A
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP/IFRS
AACSB:x x x x Applicationxxofxxknowledge
15) Which organization is responsible for setting auditing standards and overseeing the audits of p
xx xx xx xx xx xx xx xx xx xx xx xx xx
ublic companies in the United States?
xx xx xx xx xx
A) Financial Accounting Standards Board xx xx xx
B) Public Company Accounting Oversight Board
xx xx xx xx
C) American Institute of Certified Public Accountants
xx xx xx xx xx
D) Securities and Exchange Commissio xx xx xx
n Answer: B
xx x x
Diff:xx1
Objective:x x 1.1xxIFRS/GA
AP:x x GAAP
AACSB:x x x x Applicationxxofxxknowledge
3
Copyright © 2022 Pearson Education, Inc
xx xx xx xx xx
.
