Solution Manual for Intermediate
Accounting, 18th Edition, by Donald E.
Kieso, Jerry J. Weygandt and Terry D.
Warfield. Chapter 1-23
Chapter 1: Financial Accounting and Accounting Standards (Questions 1–33)
1. What is the primary objective of financial reporting, per the FASB?
A) To maximize shareholder value
B) To provide information for decision-making
C) To ensure tax compliance
D) To regulate corporate governance
Answer: B
Explanation: The FASB states that financial reporting provides information useful for
investment and credit decisions (Kieso et al., 2025, Ch. 1).
2. Which organization is primarily responsible for establishing U.S. GAAP?
A) IASB
B) FASB
C) SEC
D) AICPA
Answer: B
Explanation: The Financial Accounting Standards Board (FASB) sets U.S. GAAP
standards (Kieso et al., 2025, Ch. 1).
3. What does GAAP stand for?
A) Generally Accepted Accounting Principles
B) Global Accounting and Auditing Procedures
C) General Auditing and Accounting Practices
D) Governmental Accounting Principles
Answer: A
Explanation: GAAP refers to Generally Accepted Accounting Principles, the U.S.
financial reporting framework (Kieso et al., 2025, Ch. 1).
4. Which body enforces GAAP for publicly traded companies?
A) FASB
B) IASB
C) SEC
D) PCAOB
Answer: C
Explanation: The Securities and Exchange Commission (SEC) enforces GAAP for
public companies (Kieso et al., 2025, Ch. 1).
5. What is a key role of the IASB?
A) Setting U.S. GAAP
, B) Developing IFRS
C) Auditing financial statements
D) Regulating tax laws
Answer: B
Explanation: The International Accounting Standards Board (IASB) develops
International Financial Reporting Standards (IFRS) (Kieso et al., 2025, Ch. 1).
6. Which is a financial reporting challenge?
A) Uniform global tax rates
B) Convergence of GAAP and IFRS
C) Simplified accounting standards
D) Elimination of ethical issues
Answer: B
Explanation: Convergence of GAAP and IFRS is challenging due to differing standards
(Kieso et al., 2025, Ch. 1).
7. What is the purpose of the FASB’s Codification?
A) To replace IFRS
B) To organize GAAP into a single source
C) To regulate auditing standards
D) To simplify tax reporting
Answer: B
Explanation: The FASB Codification consolidates U.S. GAAP into one accessible
source (Kieso et al., 2025, Ch. 1).
8. Which principle assumes a business will continue operating indefinitely?
A) Economic entity
B) Going concern
C) Monetary unit
D) Periodicity
Answer: B
Explanation: The going concern principle assumes ongoing business operations (Kieso
et al., 2025, Ch. 1).
9. What does the SEC require for financial reporting?
A) Annual tax audits
B) Compliance with GAAP for public companies
C) Use of IFRS exclusively
D) Quarterly balance sheets only
Answer: B
Explanation: The SEC mandates GAAP compliance for public companies’ financial
statements (Kieso et al., 2025, Ch. 1).
10. Which group influences accounting standards through lobbying?
A) Investors
B) Pressure groups
C) Auditors
D) Tax authorities
Answer: B
Explanation: Pressure groups, such as industry associations, influence standard-setting
(Kieso et al., 2025, Ch. 1).
, 11. What is the role of the PCAOB?
A) Setting GAAP
B) Overseeing public company audits
C) Developing IFRS
D) Enforcing tax regulations
Answer: B
Explanation: The Public Company Accounting Oversight Board (PCAOB) oversees
audits of public companies (Kieso et al., 2025, Ch. 1).
12. Which assumption underlies the use of historical cost in accounting?
A) Monetary unit
B) Going concern
C) Economic entity
D) Periodicity
Answer: A
Explanation: The monetary unit assumption supports historical cost valuation in a stable
currency (Kieso et al., 2025, Ch. 1).
13. What is a key feature of the FASB’s due process?
A) Immediate standard adoption
B) Public comment periods
C) Tax authority approval
D) Auditor enforcement
Answer: B
Explanation: FASB’s due process includes public comment periods for transparency
(Kieso et al., 2025, Ch. 1).
14. Which financial statement is required under GAAP?
A) Statement of tax liabilities
B) Statement of cash flows
C) Statement of employee benefits
D) Statement of market trends
Answer: B
Explanation: GAAP requires the statement of cash flows as a core financial statement
(Kieso et al., 2025, Ch. 1).
15. What does the economic entity assumption require?
A) Combining personal and business transactions
B) Separating business and owner transactions
C) Reporting in multiple currencies
D) Annual liquidation of assets
Answer: B
Explanation: The economic entity assumption separates business and owner transactions
(Kieso et al., 2025, Ch. 1).
16. Which organization sets standards for government accounting?
A) FASB
B) GASB
C) IASB
D) SEC
Answer: B
Accounting, 18th Edition, by Donald E.
Kieso, Jerry J. Weygandt and Terry D.
Warfield. Chapter 1-23
Chapter 1: Financial Accounting and Accounting Standards (Questions 1–33)
1. What is the primary objective of financial reporting, per the FASB?
A) To maximize shareholder value
B) To provide information for decision-making
C) To ensure tax compliance
D) To regulate corporate governance
Answer: B
Explanation: The FASB states that financial reporting provides information useful for
investment and credit decisions (Kieso et al., 2025, Ch. 1).
2. Which organization is primarily responsible for establishing U.S. GAAP?
A) IASB
B) FASB
C) SEC
D) AICPA
Answer: B
Explanation: The Financial Accounting Standards Board (FASB) sets U.S. GAAP
standards (Kieso et al., 2025, Ch. 1).
3. What does GAAP stand for?
A) Generally Accepted Accounting Principles
B) Global Accounting and Auditing Procedures
C) General Auditing and Accounting Practices
D) Governmental Accounting Principles
Answer: A
Explanation: GAAP refers to Generally Accepted Accounting Principles, the U.S.
financial reporting framework (Kieso et al., 2025, Ch. 1).
4. Which body enforces GAAP for publicly traded companies?
A) FASB
B) IASB
C) SEC
D) PCAOB
Answer: C
Explanation: The Securities and Exchange Commission (SEC) enforces GAAP for
public companies (Kieso et al., 2025, Ch. 1).
5. What is a key role of the IASB?
A) Setting U.S. GAAP
, B) Developing IFRS
C) Auditing financial statements
D) Regulating tax laws
Answer: B
Explanation: The International Accounting Standards Board (IASB) develops
International Financial Reporting Standards (IFRS) (Kieso et al., 2025, Ch. 1).
6. Which is a financial reporting challenge?
A) Uniform global tax rates
B) Convergence of GAAP and IFRS
C) Simplified accounting standards
D) Elimination of ethical issues
Answer: B
Explanation: Convergence of GAAP and IFRS is challenging due to differing standards
(Kieso et al., 2025, Ch. 1).
7. What is the purpose of the FASB’s Codification?
A) To replace IFRS
B) To organize GAAP into a single source
C) To regulate auditing standards
D) To simplify tax reporting
Answer: B
Explanation: The FASB Codification consolidates U.S. GAAP into one accessible
source (Kieso et al., 2025, Ch. 1).
8. Which principle assumes a business will continue operating indefinitely?
A) Economic entity
B) Going concern
C) Monetary unit
D) Periodicity
Answer: B
Explanation: The going concern principle assumes ongoing business operations (Kieso
et al., 2025, Ch. 1).
9. What does the SEC require for financial reporting?
A) Annual tax audits
B) Compliance with GAAP for public companies
C) Use of IFRS exclusively
D) Quarterly balance sheets only
Answer: B
Explanation: The SEC mandates GAAP compliance for public companies’ financial
statements (Kieso et al., 2025, Ch. 1).
10. Which group influences accounting standards through lobbying?
A) Investors
B) Pressure groups
C) Auditors
D) Tax authorities
Answer: B
Explanation: Pressure groups, such as industry associations, influence standard-setting
(Kieso et al., 2025, Ch. 1).
, 11. What is the role of the PCAOB?
A) Setting GAAP
B) Overseeing public company audits
C) Developing IFRS
D) Enforcing tax regulations
Answer: B
Explanation: The Public Company Accounting Oversight Board (PCAOB) oversees
audits of public companies (Kieso et al., 2025, Ch. 1).
12. Which assumption underlies the use of historical cost in accounting?
A) Monetary unit
B) Going concern
C) Economic entity
D) Periodicity
Answer: A
Explanation: The monetary unit assumption supports historical cost valuation in a stable
currency (Kieso et al., 2025, Ch. 1).
13. What is a key feature of the FASB’s due process?
A) Immediate standard adoption
B) Public comment periods
C) Tax authority approval
D) Auditor enforcement
Answer: B
Explanation: FASB’s due process includes public comment periods for transparency
(Kieso et al., 2025, Ch. 1).
14. Which financial statement is required under GAAP?
A) Statement of tax liabilities
B) Statement of cash flows
C) Statement of employee benefits
D) Statement of market trends
Answer: B
Explanation: GAAP requires the statement of cash flows as a core financial statement
(Kieso et al., 2025, Ch. 1).
15. What does the economic entity assumption require?
A) Combining personal and business transactions
B) Separating business and owner transactions
C) Reporting in multiple currencies
D) Annual liquidation of assets
Answer: B
Explanation: The economic entity assumption separates business and owner transactions
(Kieso et al., 2025, Ch. 1).
16. Which organization sets standards for government accounting?
A) FASB
B) GASB
C) IASB
D) SEC
Answer: B
