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