ACG 3131 Exam 1 Extra Questions and Correct Answers
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Course
ACG 3131
Institution
ACG 3131
T/F: The statement of retained earnings is one of the financial statements most frequently provided by public companies. 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.
W...
ACG 3131 Exam 1 Extra Questions and
Correct Answers
T/F: The statement of retained earnings is one of the financial statements most
frequently provided by public companies. ✅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.
Which of the following generally provides a better indication of an enterprise's present
and continuing ability to generate favorable cash flows?
managerial basis accounting
cash basis accounting
financial basis accounting
accrual basis accounting ✅Accrual basis, not cash basis, accounting better indicates
present and continuing ability to generate favorable cash flows for a company.
The role of the Securities and Exchange Commission (SEC) in the formulation of
accounting standards can be best described as ✅the SEC relies on FASB to develop
standards but gives advice and recommendations to the private sector as needed.
The first step taken in the establishment of a typical FASB statement is: ✅topics are
identified and placed on the board's agenda.
Which of the following publications is not considered a GAAP document?
-FASB standards
-AICPA Research Bulletins
-Statement of Financial Accounting Concepts
-APB Opinions ✅Statement of Financial Accounting Concepts
T/F: Politics play no role in establishing GAAP (Generally Accepted Accounting
Principles). ✅false
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. ✅Statements 1 and 2
,T/F: IFRS is more "rules-based" in its approach to standards than U.S. GAAP. ✅false,
it is more "principles" based
An effective capital allocation process
-promotes productivity
-encourages innovation
-provides an efficient market for buying and selling securities
-all of the above ✅all of the above
Which of the following would result if there was not set of generally accepted and
universally practiced accounting standards?
-It would be almost impossible to prepare statements that could be compared.
-Each company would have to develop its own standards.
-Readers of financial statements would have to familiarize themselves with every
company's peculiar accounting and reporting practices.
-All of these answer choices are correct. ✅all of the above
T/F: The Financial Accounting Standards Advisory Council (FASAC) consults with the
FASB on major policy and technical issues and helps select task force members.
✅true
Which of the following is not a significant difference between the FASB (Financial
Accounting Standards Board) and its predecessor, the APB?
-greater autonomy
-broader representation
-larger membership
-increased independence ✅larger membership ? (it decreased from 18 to 7)
All of the following are true regarding the FASB Codification EXCEPT:
-the Codification was created to simplify user access.
-the Codification changes the way GAAP is documented, presented, and updated.
-the goal of the Codification was to provide one place where all authoritative literature
about a particular topic could be found.
-the purpose of the Codification is to create new GAAP. ✅the purpose of the
Codification is to create new GAAP.
T/F: GAAP is established strictly through the application of careful logic and empirical
findings. ✅False
GAAP is as much a product of political action as it is of careful logic or empirical
findings.
T/F: Financial reports generally focus on soft assets such as Apple's brand image or
Wal-Mart's supply chain management system. ✅false it focuses on hard assets
, The mission of the International Accounting Standards Board (IASB) is to ✅to develop,
in the public interest, a single set of high-quality and understandable IFRS for general-
purpose financial statements.
A conceptual framework establishes the concepts that provide guidance on:
-how transactions, events and circumstances should be recognized and measured.
-all of these answer choices are correct.
-identifying the boundaries of financial reporting.
-selecting the transactions, other events, and circumstances to be represented ✅all of
the above
Which of the following statements is true regarding the conceptual frameworks
developed by FASB and IASB?
-The economic entity assumption is not part of the framework due to cultural
differences.
-Both have similar measurement principles based on historical cost and fair value.
-The existing conceptual frameworks underlying U.S. GAAP and IFRS are quite
dissimilar.
-The monetary unit assumption is part of each framework and the U.S. dollar will be the
established as the common unit of currency. ✅Both IASB and FASB have similar
measurement principles based on historical cost and fair value.
The objective of general-purpose financial reporting in the conceptual framework is
✅decision usefulness
Which of the following is not among the ingredients of the fundamental quality of faithful
representation?
-materiality
-completeness
-free from error
-neutrality ✅materiality
Enhancing qualities of accounting information include all of the following except:
-understandability
-timeliness
-comparability
-neutrality ✅neutrality
The change in equity (net assets) of an entity during a period from transactions and
other events and circumstances from non-owner sources is called ✅comprehensive
income
In the United States, inflation/deflation is ignored in accounting under which of the
following assumptions? ✅monetary unit assumption
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