Intermediate Accounting 19th Edition Earl K Stice James D Stice- Test Bank

,Chapter 1—Financial Reporting


MULTIPLE CHOICE

1. The following is NOT a major component of the financial statements:
a. auditor’s opinion
b. annual report
c. explanatory notes
d. balance sheet
ANS: B PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

2. The following are users of accounting information:
a. stakeholders
b. creditors
c. investors
d. all of the above
ANS: D PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

3. Interested parties receive information about a company’s past performance from:
a. CEO’s
b. the SEC
c. financial reporting
d. financial news
ANS: C PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

4. The overall objective of financial reporting is to provide information
a. that is useful for decision making.
b. about an enterprise's assets, liabilities, and owners' equity.
c. about an enterprise's financial performance during a period.
d. that allows owners to assess management's performance.
ANS: A PTS: 1 DIF: Easy OBJ: LO 5
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

5. Which of the following is NOT normally an objective of financial reporting?
a. To provide information about an entity's assets and claims against those assets
b. To provide information that is useful in assessing an entity's sources and uses of cash
c. To provide information that is useful in lending and investing decisions
d. To provide information about an entity's liquidation value
ANS: D PTS: 1 DIF: Medium OBJ: LO 5
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

6. __________ accounting focuses on the development and communication of financial information for
external users.
a. management.
b. forensic
c. audit

, d. financial
ANS: D PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

7. The area of accounting that emphasizes developing accounting information for use within a company
is known as __________ accounting.
a. management
b. forensic
c. audit
d. financial
ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

8. The responsibility to review the work of the accountants and issue opinions as to the fairness of the
financial statements rests with
a. the external auditor.
b. the board of directors.
c. the internal auditors.
d. management.
ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

9. As independent (or external) auditors, CPAs are primarily responsible for
a. preparing financial statements in conformity with GAAP.
b. certifying the accuracy of financial statements.
c. expressing an opinion as to the fairness of financial statements.
d. filing financial statements with the SEC.
ANS: C PTS: 1 DIF: Medium OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

10. Which of the following is an internal user of a company's financial information?
a. Board of directors
b. Stockholders in the company
c. Holders of the company's bonds
d. Creditors with long-term contracts with the company
ANS: A PTS: 1 DIF: Easy OBJ: LO 1
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

11. In 1973, the following private-sector body was organized to set accounting standards in the United
States:
a. the Financial Accounting Foundation.
b. the Securities and Exchange Commission.
c. the FASB
d. the Accounting Principles Board
ANS: C PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

12. The members of the __________ are appointed by the Financial Accounting Foundation.
a. American Accounting Association.
b. Financial Accounting Standards Board

, c. Securities and Exchange Commission.
d. American Institute of Certified Public Accountants.
ANS: B PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

13. Operations of the FASB are overseen by the:
a. operations of the AICPA.
b. Financial Accounting Foundation
c. AAA.
d. financial reporting arm of the SEC.
ANS: B PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

14. A major difference between the Financial Accounting Standards Board (FASB) and its predecessor,
the Accounting Principles Board (APB), is
a. all members of the FASB serve full time, are paid a salary, and are independent of any
public or private enterprises.
b. over 50 percent of the members of the FASB are required to be Certified Public
Accountants.
c. the FASB issues exposure drafts of proposed standards.
d. all members of the FASB possess experience in both public and corporate accounting.
ANS: A PTS: 1 DIF: Medium OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

15. Which of the following is a characteristic of the Financial Accounting Standards Board?
a. The FASB is composed of five members.
b. FASB members must come from CPA firms.
c. FASB members are part-time.
d. FASB members may retain their positions with previous employers.
ANS: A PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

16. Documents issued by the FASB include all of the following except
a. Statements of Financial Accounting Standards.
b. Interpretations of Statements of Financial Accounting Standards.
c. Statements of Financial Accounting Concepts.
d. Financial Reporting Releases.
ANS: D PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

17. Primary responsibility for GAAP and public reporting currently rests with the
a. SEC.
b. FASB.
c. Congress.
d. AICPA.
ANS: A PTS: 1 DIF: Easy OBJ: LO 2
TOP: AICPA FN-Reporting MSC: AACSB Reflective Thinking

18. The responsibility of the Emerging Issues Task Force (EITF) is to
a. issue statements which reflect a consensus of the EITF on how to account for new