,Chapterf1—ANfINTRODUCTIONfTOfACCOUNTINGfTHEORY
TRUE/FALSE
1. Financialfaccountingfrefersftofaccountingfinformationfthatfisfusedfbyfmanagementfforfdecision-
fmakingfpurposes.
ANSWER: F
2. Accountingftheoryfincludesfthefbasicfrules,fdefinitions,fandfprinciplesfthatfunderliefthefdraftingfoffacc
ountingfstandardsfandfhowftheyfarefderived.
ANSWER: T
3. Accountingftheoryfincludesfconceptualfframeworks,faccountingflegislation,fvaluationfmodels,fa
ndfhypothesesfandftheories.
ANSWER: T
4. Hypothesesfandftheoriesfarefbasedfonfanfinformalfmethodfoffinvestigation.
ANSWER: F
5. Replacementfcostfasfafmeasurefoffassetfvaluefisfgenerallyfmorefreliablefthanfhistoricalfcost.
ANSWER: F
6. Accountingftheoryfisfdevelopedfandfrefinedfbyfthefprocessfoffaccountingfresearch.
ANSWER: T
7. Indirectfmeasuresfarefusuallyfpreferableftofdirectfmeasuresfbecauseftheyfareflessfcostlyftofobtain.
ANSWER: F
8. Assessmentfmeasuresfarefconcernedfwithfparticularfattributesfoffobjectsfandfarefalwaysfdirectfme
asurements.
ANSWER: F
9. Whenfafdirectfassessmentfmeasurefisfused,ftherefisfalwaysfonlyfonefcorrectfmeasure.
ANSWER: F
10. Thefsimplestftypefoffmeasuringfsystemfisfthefnominalfscale.
ANSWER: T
11. Afchartfoffaccountsfisfanfexamplefoffanfordinalfclassification.
ANSWER: F
AccountingfTheory:f9thfedition Pagef1foff11
,Chapterf1—ANfINTRODUCTIONfTOfACCOUNTINGfTHEORY
12. Numeralsfassignedfinfordinalfrankingsfindicatefanforderfoffpreferencefwherefthefdegreefoffpre
ferencefamongfranksfisfthefsame.
ANSWER: F
13. Infafratiofscale,fthefzerofpointfimpliesf“nothingness,”forfthefabsencefoffthefqualityfbeingfme
asured.
ANSWER: T
14. Usingfratiofscale,fmeasurementfisfpossiblefinfaccounting.
ANSWER: T
15. Objectivityfmayfbefdefinedfasfthefdegreefoffconsensusfamongfmeasurers.
ANSWER: T
16. Assessmentfmeasuresfarefnotfconcernedfwithfparticularfattributesfoffobjects.
ANSWER: F
17. Predictionfmeasuresfarefconcernedfwithffactorsfthatfmayfbefindicativefofffuturefconditions.
ANSWER: T
18. Timelinessfandfcostfarefpertinentftofassessmentfmeasuresfbutfarefnotfpertinentftofpredictionfme
asures.
ANSWER: F
19. Allfaccountingfmeasurementsfarefoffeitherfthefassessmentforfthefpredictionfvariety.
ANSWER: T
20. Thefneedfforfinformationfonfaftimelyfbasisfmayfconflictfwithfcostfconstraintsfinfsomefsituations.
ANSWER: T
21. Theftermsfcalculationfandfmeasurementfbothfreferftofthefvaluationfoffafrealfphenomenaforfattr
ibute.
ANSWER: F
22. Calculationsfattemptftofsimulateforfcomefasfclosefasfpossibleftofthefmeasurementfoffrealfph
enomenaforfattributes.
ANSWER: F
AccountingfTheory:f9thfedition Pagef2foff11
, Chapterf1—ANfINTRODUCTIONfTOfACCOUNTINGfTHEORY
23. FIFOfandfLIFOfmeasuresfoffcostfoffgoodsfsoldfandfinventoriesfarefexamplesfoffcalculationsfrat
herfthanfmeasurements.
ANSWER: T
24. Therefarefoftenftrade-
offsfbetweenfobjectivityfandfthefusefulnessfoffnumbersfgeneratedfbyfthefmeasurementfprocess.
ANSWER: T
25. Measurementfisfanfintegralfpartfoffaccountingftheory.
ANSWER: T
26. ThroughoutftheffinancialfhistoryfoffthefUnitedfStates,fcurrentfvaluefhasfbeenfthefacceptedfval
uationfsystemfforfpublishedffinancialfstatements.
ANSWER: F
27. Thefdiscountedfcashfflowfapproachfcanfbefusedftofdeterminefanfobjectivefmeasurementfforfmostfass
etsfandfliabilities.
ANSWER: F
28. Afgeneralfprice-
levelfadjustmentfrefersftofthefpurchasingfpowerfoffthefmonetaryfunitaryfunitfrelativeftofallfgoods
fandfservicesfinfthefeconomy.
ANSWER: T
29. Bothfexitfvaluefandfreplacementfcostfarefvaluationfsystemsfthatffallfintofthefcurrentfvaluefcat
egory.
ANSWER: T
30. Thefprincipalfargumentfusedftofjustifyfthefreplacementfcostfsystemfoverfexitfvaluesfisfthatfiffthefgre
atfmajorityfofftheffirm’sfassetsfwerefnotfalreadyfowned,fitfwouldfbefeconomicallyfjustifiableftofacq
uirefthem.
ANSWER: T
MULTIPLEfCHOICE
1. Whichfofftheffollowingfmethodsfoffvaluingfanfassetfisfbasedfonfthefamountfthatfaffirmfcouldfacq
uirefbyfsellingfthefasset?
a. Replacementfcost
b. Entryfvalue
c. Exitfvalue
d. Bothfafandfbf
ANSWER: C
AccountingfTheory:f9thfedition Pagef3foff11
TRUE/FALSE
1. Financialfaccountingfrefersftofaccountingfinformationfthatfisfusedfbyfmanagementfforfdecision-
fmakingfpurposes.
ANSWER: F
2. Accountingftheoryfincludesfthefbasicfrules,fdefinitions,fandfprinciplesfthatfunderliefthefdraftingfoffacc
ountingfstandardsfandfhowftheyfarefderived.
ANSWER: T
3. Accountingftheoryfincludesfconceptualfframeworks,faccountingflegislation,fvaluationfmodels,fa
ndfhypothesesfandftheories.
ANSWER: T
4. Hypothesesfandftheoriesfarefbasedfonfanfinformalfmethodfoffinvestigation.
ANSWER: F
5. Replacementfcostfasfafmeasurefoffassetfvaluefisfgenerallyfmorefreliablefthanfhistoricalfcost.
ANSWER: F
6. Accountingftheoryfisfdevelopedfandfrefinedfbyfthefprocessfoffaccountingfresearch.
ANSWER: T
7. Indirectfmeasuresfarefusuallyfpreferableftofdirectfmeasuresfbecauseftheyfareflessfcostlyftofobtain.
ANSWER: F
8. Assessmentfmeasuresfarefconcernedfwithfparticularfattributesfoffobjectsfandfarefalwaysfdirectfme
asurements.
ANSWER: F
9. Whenfafdirectfassessmentfmeasurefisfused,ftherefisfalwaysfonlyfonefcorrectfmeasure.
ANSWER: F
10. Thefsimplestftypefoffmeasuringfsystemfisfthefnominalfscale.
ANSWER: T
11. Afchartfoffaccountsfisfanfexamplefoffanfordinalfclassification.
ANSWER: F
AccountingfTheory:f9thfedition Pagef1foff11
,Chapterf1—ANfINTRODUCTIONfTOfACCOUNTINGfTHEORY
12. Numeralsfassignedfinfordinalfrankingsfindicatefanforderfoffpreferencefwherefthefdegreefoffpre
ferencefamongfranksfisfthefsame.
ANSWER: F
13. Infafratiofscale,fthefzerofpointfimpliesf“nothingness,”forfthefabsencefoffthefqualityfbeingfme
asured.
ANSWER: T
14. Usingfratiofscale,fmeasurementfisfpossiblefinfaccounting.
ANSWER: T
15. Objectivityfmayfbefdefinedfasfthefdegreefoffconsensusfamongfmeasurers.
ANSWER: T
16. Assessmentfmeasuresfarefnotfconcernedfwithfparticularfattributesfoffobjects.
ANSWER: F
17. Predictionfmeasuresfarefconcernedfwithffactorsfthatfmayfbefindicativefofffuturefconditions.
ANSWER: T
18. Timelinessfandfcostfarefpertinentftofassessmentfmeasuresfbutfarefnotfpertinentftofpredictionfme
asures.
ANSWER: F
19. Allfaccountingfmeasurementsfarefoffeitherfthefassessmentforfthefpredictionfvariety.
ANSWER: T
20. Thefneedfforfinformationfonfaftimelyfbasisfmayfconflictfwithfcostfconstraintsfinfsomefsituations.
ANSWER: T
21. Theftermsfcalculationfandfmeasurementfbothfreferftofthefvaluationfoffafrealfphenomenaforfattr
ibute.
ANSWER: F
22. Calculationsfattemptftofsimulateforfcomefasfclosefasfpossibleftofthefmeasurementfoffrealfph
enomenaforfattributes.
ANSWER: F
AccountingfTheory:f9thfedition Pagef2foff11
, Chapterf1—ANfINTRODUCTIONfTOfACCOUNTINGfTHEORY
23. FIFOfandfLIFOfmeasuresfoffcostfoffgoodsfsoldfandfinventoriesfarefexamplesfoffcalculationsfrat
herfthanfmeasurements.
ANSWER: T
24. Therefarefoftenftrade-
offsfbetweenfobjectivityfandfthefusefulnessfoffnumbersfgeneratedfbyfthefmeasurementfprocess.
ANSWER: T
25. Measurementfisfanfintegralfpartfoffaccountingftheory.
ANSWER: T
26. ThroughoutftheffinancialfhistoryfoffthefUnitedfStates,fcurrentfvaluefhasfbeenfthefacceptedfval
uationfsystemfforfpublishedffinancialfstatements.
ANSWER: F
27. Thefdiscountedfcashfflowfapproachfcanfbefusedftofdeterminefanfobjectivefmeasurementfforfmostfass
etsfandfliabilities.
ANSWER: F
28. Afgeneralfprice-
levelfadjustmentfrefersftofthefpurchasingfpowerfoffthefmonetaryfunitaryfunitfrelativeftofallfgoods
fandfservicesfinfthefeconomy.
ANSWER: T
29. Bothfexitfvaluefandfreplacementfcostfarefvaluationfsystemsfthatffallfintofthefcurrentfvaluefcat
egory.
ANSWER: T
30. Thefprincipalfargumentfusedftofjustifyfthefreplacementfcostfsystemfoverfexitfvaluesfisfthatfiffthefgre
atfmajorityfofftheffirm’sfassetsfwerefnotfalreadyfowned,fitfwouldfbefeconomicallyfjustifiableftofacq
uirefthem.
ANSWER: T
MULTIPLEfCHOICE
1. Whichfofftheffollowingfmethodsfoffvaluingfanfassetfisfbasedfonfthefamountfthatfaffirmfcouldfacq
uirefbyfsellingfthefasset?
a. Replacementfcost
b. Entryfvalue
c. Exitfvalue
d. Bothfafandfbf
ANSWER: C
AccountingfTheory:f9thfedition Pagef3foff11
