TEST BANK
Test Bank for Accounting Theory, Conceptual Issues in a Political and Economic
Environment 8e Harry Wolk James
JN
U
R
SE
TEST BANK
,Test Bank for Accounting Theory, Conceptual Issues in a Political and Economic Environment 8e Harry Wolk James
Dodd John RozyckiChapter 1—AN INTRODUCTION TO ACCOUNTING THEORY
TRUE/FALSE QUESTIONS
1. Financial accounting refers to accounting information that is used by management for decision-
making purposes.
ANSWER: False
2. Accounting theory includes the basic rules, definitions, and principles that underlie the drafting of
accounting standards and how they are derived.
ANSWER: True
3. Accounting theory includes conceptual frameworks, accounting legislation, valuation models,
and hypotheses and theories.
ANSWER: True
4. Hypotheses and theories are based on an informal method of investigation.
ANSWER: False
5. Replacement cost as a measure of asset value is generally more reliable than historical cost.
JN
ANSWER: False
6. Accounting theory is developed and refined by the process of accounting research.
ANSWER: True
U
7. Indirect measures are usually preferable to direct measures because they are less costly to obtain.
R
ANSWER: False
8. Assessment measures are concerned with particular attributes of objects and are always direct
SE
measurements.
ANSWER: False
9. When a direct assessment measure is used, there is always only one correct measure.
ANSWER: False
10. The simplest type of measuring system is the nominal scale.
ANSWER: True
11. A chart of accounts is an example of an ordinal classification.
ANSWER: False
,Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY
12. Numerals assigned in ordinal rankings indicate an order of preference where the degree of
preference among ranks is the same.
ANSWER: False
13. In a ratio scale, the zero point implies "nothingness," or the absence of the quality being
measured.
ANSWER: True
14. Using ratio scale measurement is possible in accounting.
ANSWER: True
15. Objectivity may be defined as the degree of consensus among measurers.
ANSWER: True
16. Assessment measures are not concerned with particular attributes of objects.
JN
ANSWER: False
17. Prediction measures are concerned with factors that may be indicative of future conditions.
ANSWER: True
U
18. Timeliness and cost are pertinent to assessment measures but are not pertinent to prediction
measures.
R
ANSWER: False
SE
19. All accounting measurements are of either the assessment or the prediction variety.
ANSWER: True
20. The need for information on a timely basis may conflict with cost constraints in some situations.
ANSWER: True
21. The terms calculation and measurement both refer to the valuation of a real phenomena or
attribute.
ANSWER: False
22. Calculations attempt to simulate or come as close as possible to the measurement of real
phenomena or attributes.
ANSWER: False
, Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY
23. FIFO and LIFO measures of cost of goods sold and inventories are examples of calculations
rather than measurements.
ANSWER: True
24. There are often trade-offs between objectivity and the usefulness of numbers generated by the
measurement process.
ANSWER: True
25. Measurement is an integral part of accounting theory.
ANSWER: True
26. Throughout the financial history of the United States, current value has been the accepted
valuation system for published financial statements.
ANSWER: False
JN
27. The discounted cash flow approach can be used to determine an objective measurement for most
assets and liabilities.
ANSWER: False
28. A general price-level adjustment refers to the purchasing power of the monetary unitary unit
U
relative to all goods and services in the economy.
ANSWER: True
R
29. Both exit value and replacement cost are valuation systems that fall into the current value
category.
SE
ANSWER: True
30. The principal argument used to justify the replacement cost system over exit values is that if the
great majority of the firm's assets were not already owned, it would be economically justifiable to
acquire them.
ANSWER: True
MULTIPLE CHOICE QUESTIONS
1. Which of the following methods of valuing an asset is based on the amount that a firm could
acquire by selling the asset?
a. Replacement cost
b. Entry value
c. Exit value
d. Both a and b
ANSWER: C
Test Bank for Accounting Theory, Conceptual Issues in a Political and Economic
Environment 8e Harry Wolk James
JN
U
R
SE
TEST BANK
,Test Bank for Accounting Theory, Conceptual Issues in a Political and Economic Environment 8e Harry Wolk James
Dodd John RozyckiChapter 1—AN INTRODUCTION TO ACCOUNTING THEORY
TRUE/FALSE QUESTIONS
1. Financial accounting refers to accounting information that is used by management for decision-
making purposes.
ANSWER: False
2. Accounting theory includes the basic rules, definitions, and principles that underlie the drafting of
accounting standards and how they are derived.
ANSWER: True
3. Accounting theory includes conceptual frameworks, accounting legislation, valuation models,
and hypotheses and theories.
ANSWER: True
4. Hypotheses and theories are based on an informal method of investigation.
ANSWER: False
5. Replacement cost as a measure of asset value is generally more reliable than historical cost.
JN
ANSWER: False
6. Accounting theory is developed and refined by the process of accounting research.
ANSWER: True
U
7. Indirect measures are usually preferable to direct measures because they are less costly to obtain.
R
ANSWER: False
8. Assessment measures are concerned with particular attributes of objects and are always direct
SE
measurements.
ANSWER: False
9. When a direct assessment measure is used, there is always only one correct measure.
ANSWER: False
10. The simplest type of measuring system is the nominal scale.
ANSWER: True
11. A chart of accounts is an example of an ordinal classification.
ANSWER: False
,Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY
12. Numerals assigned in ordinal rankings indicate an order of preference where the degree of
preference among ranks is the same.
ANSWER: False
13. In a ratio scale, the zero point implies "nothingness," or the absence of the quality being
measured.
ANSWER: True
14. Using ratio scale measurement is possible in accounting.
ANSWER: True
15. Objectivity may be defined as the degree of consensus among measurers.
ANSWER: True
16. Assessment measures are not concerned with particular attributes of objects.
JN
ANSWER: False
17. Prediction measures are concerned with factors that may be indicative of future conditions.
ANSWER: True
U
18. Timeliness and cost are pertinent to assessment measures but are not pertinent to prediction
measures.
R
ANSWER: False
SE
19. All accounting measurements are of either the assessment or the prediction variety.
ANSWER: True
20. The need for information on a timely basis may conflict with cost constraints in some situations.
ANSWER: True
21. The terms calculation and measurement both refer to the valuation of a real phenomena or
attribute.
ANSWER: False
22. Calculations attempt to simulate or come as close as possible to the measurement of real
phenomena or attributes.
ANSWER: False
, Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY
23. FIFO and LIFO measures of cost of goods sold and inventories are examples of calculations
rather than measurements.
ANSWER: True
24. There are often trade-offs between objectivity and the usefulness of numbers generated by the
measurement process.
ANSWER: True
25. Measurement is an integral part of accounting theory.
ANSWER: True
26. Throughout the financial history of the United States, current value has been the accepted
valuation system for published financial statements.
ANSWER: False
JN
27. The discounted cash flow approach can be used to determine an objective measurement for most
assets and liabilities.
ANSWER: False
28. A general price-level adjustment refers to the purchasing power of the monetary unitary unit
U
relative to all goods and services in the economy.
ANSWER: True
R
29. Both exit value and replacement cost are valuation systems that fall into the current value
category.
SE
ANSWER: True
30. The principal argument used to justify the replacement cost system over exit values is that if the
great majority of the firm's assets were not already owned, it would be economically justifiable to
acquire them.
ANSWER: True
MULTIPLE CHOICE QUESTIONS
1. Which of the following methods of valuing an asset is based on the amount that a firm could
acquire by selling the asset?
a. Replacement cost
b. Entry value
c. Exit value
d. Both a and b
ANSWER: C
