TEST BANK FOR
Financial Reporting and Analysis, 13th Edition Charles H. Gibson
Chapter 1-13
CHAPTER 1—INTRODUCTION TO FINANCIAL REPORTING
MULTIPLE CHOICE
1. Charging off equipment that cost less than $20 would be an example of the application of:
a. going concern.
b. cost.
c. matching.
d. materiality.
e. realization.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
2. The going concern assumption:
a. is applicable to all financial statements.
b. primarily involves periodic income measurement.
c. allows for the statements to be prepared under generally accepted accounting principles.
d. requires that accounting procedures be the same from period to period.
e. none of the answers are correct.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
3. Understating assets and revenues is justified based on:
a. realization assumption.
b. matching.
c. consistency.
d. realization.
e. None of the answers are correct.
ANS: E PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
4. The assumption that enables us to prepare periodic statements between the time that a business
commences operations and the time it goes out of business is:
, a. time period.
b. business entity.
c. historical cost.
d. transaction.
e. None of the answers are correct.
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
5. Valuing assets at their liquidation values is not consistent with:
a. conservatism.
b. materiality.
c. going concern.
d. time period.
e. None of the answers are correct.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
6. The business being separate and distinct from the owners is an integral part of the:
a. time period assumption.
b. going concern assumption.
c. business entity assumption.
d. realization assumption.
e. None of the answers are correct.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
7. The principle that assumes the reader of the financial statements is not interested in the liquidation values
is:
a. conservatism.
b. matching.
c. time period.
d. realization.
e. None of the answers are correct.
ANS: E PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
, 8. An accounting period that ends when operations are at a low ebb is:
a. a calendar year.
b. a fiscal year.
c. the natural business year.
d. an operating year.
e. None of the answers are correct.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
9. The accounting principle that assumes that inflation will not take place or will be immaterial is:
a. monetary unit.
b. historical cost.
c. realization.
d. going concern.
e. None of the answers are correct.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
10. Valuing inventory at the lower of cost or market is an application of the:
a. time period assumption.
b. realization principle.
c. going concern principle.
d. conservatism principle.
e. None of the answers are correct.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
11. The realization principle leads accountants to usually recognize revenue at:
a. the end of production.
b. during production.
c. the receipt of cash.
d. the point of sale.
e. None of the answers are correct.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
, 12. The comment that "items that are not material may be recorded in the financial statements in the most
economical and expedient manner possible" is representative of:
a. matching.
b. conservatism.
c. realization.
d. materiality.
e. None of the answers are correct.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Comprehension
NOT: Time: 1 min.
13. The assumption that deals with when to recognize the costs that are associated with the revenue that is
being recognized is:
a. matching.
b. going concern.
c. consistency.
d. materiality.
e. None of the answers are correct.
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
14. The most significant current source of generally accepted accounting principles is the:
a. New York Stock Exchange.
b. Accounting Principles Board.
c. Accounting Research Studies.
d. AICPA committee on Accounting Procedure.
e. Financial Accounting Standards Board.
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Development of Generally Accepted Accounting Principles (GAAP) in the United States
KEY: Bloom's: Knowledge NOT: Time: 1 min.
15. All but one of the following statements indicates a difference between the Financial Accounting
Standards Board (FASB) and prior approaches. Select the one that is not a difference.
a. The FASB is independent of the AICPA.
b. The size of the board is much smaller.
c. The FASB has broader representation.
d. The FASB is the primary board for the development of generally accepted accounting
principles.
e. Members of the FASB serve on a full-time basis.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Communication
Financial Reporting and Analysis, 13th Edition Charles H. Gibson
Chapter 1-13
CHAPTER 1—INTRODUCTION TO FINANCIAL REPORTING
MULTIPLE CHOICE
1. Charging off equipment that cost less than $20 would be an example of the application of:
a. going concern.
b. cost.
c. matching.
d. materiality.
e. realization.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
2. The going concern assumption:
a. is applicable to all financial statements.
b. primarily involves periodic income measurement.
c. allows for the statements to be prepared under generally accepted accounting principles.
d. requires that accounting procedures be the same from period to period.
e. none of the answers are correct.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
3. Understating assets and revenues is justified based on:
a. realization assumption.
b. matching.
c. consistency.
d. realization.
e. None of the answers are correct.
ANS: E PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
4. The assumption that enables us to prepare periodic statements between the time that a business
commences operations and the time it goes out of business is:
, a. time period.
b. business entity.
c. historical cost.
d. transaction.
e. None of the answers are correct.
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
5. Valuing assets at their liquidation values is not consistent with:
a. conservatism.
b. materiality.
c. going concern.
d. time period.
e. None of the answers are correct.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
6. The business being separate and distinct from the owners is an integral part of the:
a. time period assumption.
b. going concern assumption.
c. business entity assumption.
d. realization assumption.
e. None of the answers are correct.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
7. The principle that assumes the reader of the financial statements is not interested in the liquidation values
is:
a. conservatism.
b. matching.
c. time period.
d. realization.
e. None of the answers are correct.
ANS: E PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
, 8. An accounting period that ends when operations are at a low ebb is:
a. a calendar year.
b. a fiscal year.
c. the natural business year.
d. an operating year.
e. None of the answers are correct.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
9. The accounting principle that assumes that inflation will not take place or will be immaterial is:
a. monetary unit.
b. historical cost.
c. realization.
d. going concern.
e. None of the answers are correct.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
10. Valuing inventory at the lower of cost or market is an application of the:
a. time period assumption.
b. realization principle.
c. going concern principle.
d. conservatism principle.
e. None of the answers are correct.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
11. The realization principle leads accountants to usually recognize revenue at:
a. the end of production.
b. during production.
c. the receipt of cash.
d. the point of sale.
e. None of the answers are correct.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
, 12. The comment that "items that are not material may be recorded in the financial statements in the most
economical and expedient manner possible" is representative of:
a. matching.
b. conservatism.
c. realization.
d. materiality.
e. None of the answers are correct.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Comprehension
NOT: Time: 1 min.
13. The assumption that deals with when to recognize the costs that are associated with the revenue that is
being recognized is:
a. matching.
b. going concern.
c. consistency.
d. materiality.
e. None of the answers are correct.
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Traditional Assumptions of the Accounting Model KEY: Bloom's: Knowledge
NOT: Time: 1 min.
14. The most significant current source of generally accepted accounting principles is the:
a. New York Stock Exchange.
b. Accounting Principles Board.
c. Accounting Research Studies.
d. AICPA committee on Accounting Procedure.
e. Financial Accounting Standards Board.
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Communication
STA: AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP: Development of Generally Accepted Accounting Principles (GAAP) in the United States
KEY: Bloom's: Knowledge NOT: Time: 1 min.
15. All but one of the following statements indicates a difference between the Financial Accounting
Standards Board (FASB) and prior approaches. Select the one that is not a difference.
a. The FASB is independent of the AICPA.
b. The size of the board is much smaller.
c. The FASB has broader representation.
d. The FASB is the primary board for the development of generally accepted accounting
principles.
e. Members of the FASB serve on a full-time basis.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Communication
