,Intermediate Accounting, 3e (Gordon/Raedy/Sannella)
st st st
Chapter 1 The Financial Reporting Environment
st st st st
1.1 Overview of Financial Reporting st st st
1) The financial reporting process generates three basic financial statements.
st st st st st st st st
Answer: FALSE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
2) The demand for financial information is based on market participant demand
st st st st st st st st st st
. Answer: TRUE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
3) Managers of economic entities are best considered to be users of financial information
st st st st st st st st st st st st
. Answer: FALSE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
4) Managers of economic entities are best considered to be preparers of financial information
st st st st st st st st st st st st
. Answer: TRUE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly trade
st st st st st st st st st st st
d companies.
st
Answer: TRUE s t s t
Diff:st2
Objective:s t 1.1stIFRS/GA
AP:s t GAAP
AACSB:s t s t Applicationstofstknowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies
st st st st st st st st st st st st
. Answer: FALSE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP
AACSB:s t s t Applicationstofstknowledge
1
Copyright © 2022 Pearson Education, Inc.
st st st st st
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards an
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d oversees the audits of public companies in the United States.
st st st st st st st st st st
Answer: FALSE s t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP
AACSB:s t s t Applicationstofstknowledge
8) Financial accounting standards influence the behavior of managers and other internal users
st st st st st st st st st st st
. Answer: TRUE
st s t
Diff:st2
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
9) Theories and procedures that evolve as a result of lobbying from various groups are examples o
st st st st st st st st st st st st st st st
f proactive factors within the legal, economic, political, and social environment.
st st st st st st st st st st
Answer: FALSE s t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
10) Financial information includes information that is not governed by rules set forth by the accountin
st st st st st st st st st st st st st st
g standard-setting bodies.
st st
Answer: TRUE s t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
11) What is the term that describes the process of identifying, measuring, and communicating financia
st st st st st st st st st st st st st
l information about an economic entity to various user groups?
st st st st st st st st st
A) financial reporting st
B) accounting standard setting st st
C) financial statement st
D) financial accounting st
Answer: D
st s t
Diff:st2
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
2
Copyright © 2022 Pearson Education, Inc.
st st st st st
, 12) Which element of financial accounting involves identifying the individuals who demand financia
st st st st st st st st st st st
l information?
st
A) financial information st
B) economic entity st
C) user groups
st
D) legal, economic, political, and social environment
st st st st st s
Answer: C
t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
13) Which of the following is not one of the four basic financial statements?
st st st st st st st st st st st st
A) balance sheet st
B) trial balance
st
C) cash flows statement
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D) statement of comprehensive income
st st st s
Answer: B
t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
14) Which organization is responsible for promulgating U.S. GAAP?
st st st st st st st
A) Financial Accounting Standards Board
st st st
B) Public Company Accounting Oversight Board
st st st st
C) International Accounting Standards Board st st st
D) Securities and Exchange Commission
st st st s
Answer: A
t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
15) Which organization is responsible for setting auditing standards and overseeing the audits of publi
st st st st st st st st st st st st st
c companies in the United States?
st st st st st
A) Financial Accounting Standards Board
st st st
B) Public Company Accounting Oversight Board
st st st st
C) American Institute of Certified Public Accountants
st st st st st
D) Securities and Exchange Commission
st st st s
Answer: B
t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP
AACSB:s t s t Applicationstofstknowledge
3
Copyright © 2022 Pearson Education, Inc. st st st st st
st st st
Chapter 1 The Financial Reporting Environment
st st st st
1.1 Overview of Financial Reporting st st st
1) The financial reporting process generates three basic financial statements.
st st st st st st st st
Answer: FALSE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
2) The demand for financial information is based on market participant demand
st st st st st st st st st st
. Answer: TRUE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
3) Managers of economic entities are best considered to be users of financial information
st st st st st st st st st st st st
. Answer: FALSE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
4) Managers of economic entities are best considered to be preparers of financial information
st st st st st st st st st st st st
. Answer: TRUE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly trade
st st st st st st st st st st st
d companies.
st
Answer: TRUE s t s t
Diff:st2
Objective:s t 1.1stIFRS/GA
AP:s t GAAP
AACSB:s t s t Applicationstofstknowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies
st st st st st st st st st st st st
. Answer: FALSE
st s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP
AACSB:s t s t Applicationstofstknowledge
1
Copyright © 2022 Pearson Education, Inc.
st st st st st
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards an
st st st st st st st st st st st
d oversees the audits of public companies in the United States.
st st st st st st st st st st
Answer: FALSE s t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP
AACSB:s t s t Applicationstofstknowledge
8) Financial accounting standards influence the behavior of managers and other internal users
st st st st st st st st st st st
. Answer: TRUE
st s t
Diff:st2
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
9) Theories and procedures that evolve as a result of lobbying from various groups are examples o
st st st st st st st st st st st st st st st
f proactive factors within the legal, economic, political, and social environment.
st st st st st st st st st st
Answer: FALSE s t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
10) Financial information includes information that is not governed by rules set forth by the accountin
st st st st st st st st st st st st st st
g standard-setting bodies.
st st
Answer: TRUE s t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
11) What is the term that describes the process of identifying, measuring, and communicating financia
st st st st st st st st st st st st st
l information about an economic entity to various user groups?
st st st st st st st st st
A) financial reporting st
B) accounting standard setting st st
C) financial statement st
D) financial accounting st
Answer: D
st s t
Diff:st2
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
2
Copyright © 2022 Pearson Education, Inc.
st st st st st
, 12) Which element of financial accounting involves identifying the individuals who demand financia
st st st st st st st st st st st
l information?
st
A) financial information st
B) economic entity st
C) user groups
st
D) legal, economic, political, and social environment
st st st st st s
Answer: C
t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
13) Which of the following is not one of the four basic financial statements?
st st st st st st st st st st st st
A) balance sheet st
B) trial balance
st
C) cash flows statement
st st
D) statement of comprehensive income
st st st s
Answer: B
t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
14) Which organization is responsible for promulgating U.S. GAAP?
st st st st st st st
A) Financial Accounting Standards Board
st st st
B) Public Company Accounting Oversight Board
st st st st
C) International Accounting Standards Board st st st
D) Securities and Exchange Commission
st st st s
Answer: A
t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP/IFRS
AACSB:s t s t Applicationstofstknowledge
15) Which organization is responsible for setting auditing standards and overseeing the audits of publi
st st st st st st st st st st st st st
c companies in the United States?
st st st st st
A) Financial Accounting Standards Board
st st st
B) Public Company Accounting Oversight Board
st st st st
C) American Institute of Certified Public Accountants
st st st st st
D) Securities and Exchange Commission
st st st s
Answer: B
t s t
Diff:st1
Objective:s t 1.1stIFRS/GA
AP:s t GAAP
AACSB:s t s t Applicationstofstknowledge
3
Copyright © 2022 Pearson Education, Inc. st st st st st
