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INTERMEDIATE ACCOUNTING 1 EXAM 1 CHAPTER 2 QUESTIONS AND ANSWERS
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INTERMEDIATE ACCOUNTING 1 EXAM 1 CHAPTER 2 QUESTIONS AND ANSWERS
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INTERMEDIATE ACCOUNTING 1 EXAM 1CHAPTER 2 QUESTIONS AND
ANSWERS
Q 2.1:
Which of the following statements is inaccurate regarding the FASB Conceptual
Framework Project?
A:
Business entities will need far less assistance from accountants because the financial
reporting process will be quite easy to apply.
B:
A coherent set of accounting standards and rules should result.
C:
A conceptual framework should increase financial statement users' understanding of
and confidence in financial reporting.
D:
Practical problems should be more quickly solvable by reference to an existing
conceptual framework. - Answer-Business entities will need far less assistance from
accountants because the financial reporting process will be quite easy to apply.
Q 2.2:
Mark was recording accounting transactions when he came across a non-standard
transaction type. However, based on his knowledge of accounting practices, he was
able to come up with a reasonable solution for recording the transaction. This is an
example of using a(n) - Answer-conceptual framework to solve new problems.
Q 2.3:
Madeline is recording revenues and expenses. When doing this, she is following the
guidance set forth in which of the following Statements of Financial Accounting
Concepts? - Answer-SFAC No. 6
Q 2.4:
What is needed in order to move from understanding the purpose of accounting to
knowing how to implement accounting practices? - Answer-Knowing the qualitative
characteristics of accounting information and the elements of financial statements.
Q 2.5:
Michelle is preparing her company's income statement and balance sheet. This
information will be used by a bank to determine if they want to provide a loan to the
company. By preparing these documents, Michelle is - Answer-meeting the objective of
financial reporting.
Q 2.6:
, How are financial statements related to the objective of financial reporting? - Answer-
Companies use financial statements to provide financial information to potential capital
providers; and providing information to capital providers is the objective of financial
reporting.
Q 2.7:
The fundamental quality of faithful representation is violated in which of the following
situations?
A:
Financial statements included buildings with a carrying amount estimated by
management.
B:
All of these answer choices violate faithful representation.
C:
The management report refers to new discoveries and inventions made, but the
financial statements never report the results.
D:
Financial statements were issued one year late - Answer-Financial statements included
buildings with a carrying amount estimated by management.
Q 2.8:
The primary quality of relevance includes which of the following characteristics? -
Answer-materiality
Q 2.9:
Accounting information that is complete, free from error, and neutral is - Answer-a
faithful representation.
Q 2.10:
It is inaccurate to say that one of the following would be included in comprehensive
income. Which is it?
A:
Changes in cash flow resulting from sales to a particular entity where ultimate payment
by the entity is doubtful.
B:
Changes in cash flow resulting from investments by or distribution to owners.
C:
Changes in cash flow resulting from sale of assets other than inventory.
D:
Changes in cash flow resulting from revenue generated by a totally owned subsidiary. -
Answer-Changes in cash flow resulting from investments by or distribution to owners.
Q 2.11:
Which of the following defines equity according to the FASB conceptual framework?
A:
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