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The Financial Accounting Standards Board employs a "due process" system which

(Points: 5) has all CPAs in the United States vote on a new Statement. enables interested
parties to express their views on issues under consideration. identifies the accounting
issues that are the most important. requires that all accountants receive a copy of financial
2. (TCO A) The IASB: (Points: 5) governs accounting standards in the U.S. is working
on a convergence project with the FASB. sets the accounting standards for only
European countries. plays only a minor part in accounting rule making throughout the
3. (TCO A) International GAAP, or i-GAAP: (Points: 5) has different standards than
under U.S. GAAP. has some commonality with U.S. GAAP in many areas. is accepted
by many countries throughout the world all of the above are true.
4. (TCO A) Information is neutral if it: (Points: 5) provides benefits which are at least
equal to the costs of its preparation. can be compared with similar information about an
enterprise at other points in time. would have no impact on a decision maker. is free from
bias toward a predetermined result.
5. (TCO A) Which of the following elements of financial statements is not a component
of comprehensive income? (Points: 5) Revenues Distributions to owners Losses
6. (TCO A) Issuance of common stock for cash affects which basic element of financial
statements? (Points: 5) Revenues Losses Liabilities Equity
7. (TCO A) Which basic element of financial statements arise from peripheral or
incidental transactions? (Points: 5) Assets Liabilities Gains Expenses
8. (TCO A) Which basic assumption may not be followed when a firm in bankruptcy
reports financial results? (Points: 5) Economic entity assumption Going concern
assumption Periodicity assumption Monetary unit assumption
9. (TCO A) What is the quality of information that enables users to better forecast future
operations? (Points: 5) Reliability. Materiality. Comparability. Relevance.
10. (TCO A) Financial information exhibits the characteristic of consistency when
(Points: 5) expenses are reported as charges against revenue in the period in which they
are paid. accounting entities give accountable events the same accounting treatment
from period to period. extraordinary gains and losses are not included on the income
statement. accounting procedures are adopted which give a consistent rate of net income
11. (TCO A) Which of the following is true with regard to the element "comprehensive
income"? (Points: 5) includes all changes in equity during a period except those

resulting from investments by owners and distributions to owners. is optional for

financial statement preparers. is not in accordance with GAAP. came into law with the
passing of the Sarbanes-Oxley Act.
Not 100% sure about 11
12. (TCO A) Which of the following basic accounting assumptions is threatened by the
existence of severe inflation in the economy? (Points: 5) Monetary unit assumption.
Periodicity assumption. Going-concern assumption. Economic entity assumption.
13. (TCO D) One criticism not normally aimed at a balance sheet prepared using current
accounting and reporting standards is (Points: 5) failure to reflect current value
information. the extensive use of separate classifications. an extensive use of estimates.
failure to include items of financial value that cannot be recorded objectively.
14. (TCO D) The amount of time that is expected to elapse until an asset is realized or
otherwise converted into cash is referred to as (Points: 5) solvency. financial flexibility.
liquidity. exchangeability.
15. (TCO D) The net assets of a business are equal to (Points: 5) current assets minus
current liabilities. total assets plus total liabilities. total assets minus total stockholders'
equity. none of these.
16. (TCO D) Houghton Company has the following items: common stock, $720,000;
treasury stock, $85,000; deferred taxes, $100,000 and retained earnings, $313,000. What
total amount should Houghton Company report as stockholders' equity? (Points: 5)
$848,000 $948,000 $1,048,000 $1,118,000
17. (TCO D) The current assets section of the balance sheet should include (Points: 5)
machinery patents goodwill inventory
18. (TCO D) An example of an item which is not an element of working capital is:
(Points: 5) accrued interest on notes receivable. goodwill. goods in process. temporary
19. (TCO D) Which of the following is not an acceptable major asset classification?
(Points: 5) Current assets Long-term assets Property, plant, and equipment Deferred
20. (TCO D) The presentation of long-term liabilities in the balance sheet should
disclose: (Points: 5) maturity dates interest rates conversion rights all of the above
21. (TCO D) Equity or debt securities held to finance future construction of additional
manufacturing plants should be classified on the balance sheet as: (Points: 5) current
assets. property, plant and equipment. intangible assets. long-term investments.

22. (TCO D) Treasury stock should be reported as a(n) (Points: 5) current asset.
investment other asset. reduction of stockholder's equity.