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FDIC Accounting Exam 1, Chapters 1-3 QUESTIONS and ANSWERS
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FDIC Accounting Exam 1, Chapters 1-3 QUESTIONS and ANSWERS
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FDIC Accounting Exam 1, Chapters 1 -3 Chapter 1 1. The statement of retained earnings is one of the financial statements most frequently provided by public companies. A. True B. False Correct answer - False The financial statements most frequently provided by public companies include the balance sheet, the statement of cash flows, and the statement of stockholder's equity. Chapter 1 2. Capital allocation is the process of determining how and at what cost money is allocated among competing interests . A. True B. False Correct answer - True. Capital allocation is the process of determining how and at what cost money is allocated among competing interests. Chapter 1 3. Which of the following generally provides a better indication of an enterprise's p resent and continuing ability to generate favorable cash flows? A. Cash basis accounting. B. Accrual basis accounting. C. Managerial basis accounting. D. Financial basis accounting. Correct answer - B. Accrual basis accounting. Accrual basis accounting better indicates present and continuing favorable cash flows for a company. Chapter 1 4. Accounting principles are "generally accepted" only when I. an authoritative accounting rule -making body has established it in an official pronouncement. II. it has been accepted as appropriate because of its universal application. A. I only. B. II only. C. I or II. D. Neither I nor II. Correct answer - C. I or II. Accounting principles are "generally accepted" only when an authoritative accounting rule-making body h as established it in an official pronouncement or over time it has been accepted as appropriate because of its universal application. Chapter 1 5. The role of the Securities and Exchange Commission in the formulation of accounting principles can be best d escribed as A. consistently primary. B. consistently secondary. C. sometimes primary and sometimes secondary. D. non -existent. Correct answer - C. sometimes primary and sometimes secondary. The Securities and Exchange Commission has sometimes primary and sometimes secondary roles in the formulation of accounting principles. Chapter 1 6. Which of the following was established by the federal government to help develop and standardize financial information presented to stockholders? A. AICPA. B. FASB. C. GASB. D. SEC. Correct answer - D. SEC. As a result of the call for greater regulation after the stock market crash of 1929, the federal government established the SEC to help develop and standardize financial information for stockholders. Chapter 1 7. The first step taken in the establishment of a typical FASB statement is: A. the board conducts research and analysis and a discussion memorandum is issued. B. a public hearing on the proposed standard is held. C. the board evaluates the research and public response and issues an exposure draft. D. topics are identified and placed on the board's agenda. Correct answer - D. topics are identified and placed on the board's agenda. The first step taken in establishing financial accounting standards is a topic is identified and placed on the board's agenda. Chapter 1 8. Financial Accounting Concepts are a major type of pronouncement issued by the FASB. A. True B. False Correct answer - True Financial Accounting Concepts are one of the two major types of pronounce ments issued by the FASB. Chapter 1 9. Which of the following publications is not considered a GAAP document? A. Statements of financial standards issued by the FASB B. Accounting interpretations issued by the FASB C. APB Opinions D. Accounting research studies issued by the AICPA Correct answer - D. Accounting research studies issued by the AICPA The accounting research studies issued by the AICPA are not considered GAAP documents. Chapter 1 10. Generally accepted accounting principles A. include detailed practices and procedures as well as broad guidelines of general application. B. are influenced by pronouncements of the SEC and IRS. C. change over time as the nature of the business environment changes. D. All of these answer choices are correct. Correct answer - D. All of these answer choices are correct. Generally accepted accounting principles include all items listed. Chapter 1 11. Politics play no role in establishing GAAP. A. True B. False Correct answer - B. False Politics is everywhere. GAAP is part of the real world, and it cannot escape politics and political pressures. Chapter 1 12. All listed companies in the European Union use IFRS. A. True B. False Correct answer - A. True Over 115 countries including those in the European Union use IFRS. Chapter 1 13. From the four statements that follow, which are true? 1. Technical competence is not enough when encountering ethical decisions. 2. The pressures "to bend the rules," "to play the game," "to just ignore it" can be considerable. 3. Time, job, client, personal, and peer pressures do not complicate the process of ethical sensitivity and selection among alternatives. 4. The decision may be easier because there is no comprehensive ethical system to provide guidelines. A. 1, 2, 3, and 4 are all true. B. 1, 2, and 4 are all true. C. 2 and 4 are all true. D. 1 and 2 are all true. Correct answer - D. 1 and 2 are all true. 1 and 2 are true, 3 and 4 are false, pressures complicate ethics as does the lack of guidelines. Chapter 1 14. Internati onal Financial Reporting Standards (IFRS) are issued by the: A. FASB. B. IASB. C. IASF. D. SEC. Correct answer - B. IASB. The International Accounting Standards Board (IASB) issues International Financial Reporting Standards (IFRS). Chapter 1 15. IFRS is more "rule -based" in its approach to standards than U.S. GAAP. A. True B. False Correct answer - B. False IFRS is more "principle -based" in its approach to standards than is U.S. GAAP. Chapter 1 16. Financial information that is better provided, or can only be provided, by means of financial reporting other than formal financial statements include all of the following except:The benefits of buying summaries with Stuvia:
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