Intermediate Accounting (Gordon/Raedy/Sannella)
Chapter 1 The Financial Reporting Environment
1.1 Overview of Financial Reporting
1) The financial reporting process generates three basic financial statements.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
2) The demand for financial information is based on market factors.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
3) Managers of economic entities are best considered to be users of financial information.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
,4) Managers of economic entities are best considered to be preparers of financial information.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
5) The Security Exchange Commission (SEC) regulates financial reporting for publicly traded
companies.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting
standards and oversees the audits of public companies in the United States.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
8) Financial accounting standards influence the behavior of managers and other internal users.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
9) What is the term that describes the process of identifying, measuring, and communicating
financial information about an economic entity to various user groups?
A) financial reporting
B) accounting standard setting
C) financial statement
D) financial accounting
Answer: D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
, 10) Which need is the primary influence on the demand for financial information?
A) the need for managers to make decisions that improve organizational effectiveness and
efficiency
B) the need for society to maintain an equilibrium of good and services
C) the need for user groups to make decisions regarding resource allocation
D) the need for regulators to control improper business behavior
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
11) Which of the following is not one of the four basic financial statements?
A) balance sheet
B) general-purpose financial statement
C) cash flows statement
D) statement of comprehensive income
Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
Chapter 1 The Financial Reporting Environment
1.1 Overview of Financial Reporting
1) The financial reporting process generates three basic financial statements.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
2) The demand for financial information is based on market factors.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
3) Managers of economic entities are best considered to be users of financial information.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
,4) Managers of economic entities are best considered to be preparers of financial information.
Answer: TRUE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
5) The Security Exchange Commission (SEC) regulates financial reporting for publicly traded
companies.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting
standards and oversees the audits of public companies in the United States.
Answer: FALSE
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP
AACSB: Application of knowledge
8) Financial accounting standards influence the behavior of managers and other internal users.
Answer: TRUE
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
9) What is the term that describes the process of identifying, measuring, and communicating
financial information about an economic entity to various user groups?
A) financial reporting
B) accounting standard setting
C) financial statement
D) financial accounting
Answer: D
Diff: 2
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
, 10) Which need is the primary influence on the demand for financial information?
A) the need for managers to make decisions that improve organizational effectiveness and
efficiency
B) the need for society to maintain an equilibrium of good and services
C) the need for user groups to make decisions regarding resource allocation
D) the need for regulators to control improper business behavior
Answer: C
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
11) Which of the following is not one of the four basic financial statements?
A) balance sheet
B) general-purpose financial statement
C) cash flows statement
D) statement of comprehensive income
Answer: B
Diff: 1
Objective: 1.1
IFRS/GAAP: GAAP/IFRS
AACSB: Application of knowledge
