,Intermediate Accounting, 3e (Gordon/Raedy/Sannella)
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Chapter 1 The Financial Reporting Environment
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1.1 Overview of Financial Reporting cn cn cn
1) The financial reporting process generates three basic financial statements
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. Answer: FALSE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
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2) The demand for financial information is based on market participant demand
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. Answer: TRUE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
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3) Managers of economic entities are best considered to be users of financial information
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. Answer: FALSE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
4) Managers of economic entities are best considered to be preparers of financial information
cn cn cn cn cn cn cn cn cn cn cn cn
. Answer: TRUE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly trade
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d companies.
cn
Answer: TRUE c n c n
Diff: 2 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP c n
AACSB: Application of knowledge
c n c n cn cn
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies
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. Answer: FALSE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP c n
AACSB: Application of knowledge
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1
Copyright © 2022 Pearson Education, Inc.
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,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards an
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d oversees the audits of public companies in the United States.
cn cn cn cn cn cn cn cn cn cn
Answer: FALSE c n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP c n
AACSB: Application of knowledge
c n c n cn cn
8) Financial accounting standards influence the behavior of managers and other internal users
cn cn cn cn cn cn cn cn cn cn cn
. Answer: TRUE
cn c n
Diff: 2 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS c n
AACSB: Application of knowledge
c n c n cn cn
9) Theories and procedures that evolve as a result of lobbying from various groups are examples
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of proactive factors within the legal, economic, political, and social environment.
cn cn cn cn cn cn cn cn cn cn
Answer: FALSE c n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS c n
AACSB: Application of knowledge
c n c n cn cn
10) Financial information includes information that is not governed by rules set forth by the accountin
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g standard-setting bodies.
cn cn
Answer: TRUE c n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS c n
AACSB: Application of knowledge
c n c n cn cn
11) What is the term that describes the process of identifying, measuring, and communicating financia
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l information about an economic entity to various user groups?
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A) financial reporting cn
B) accounting standard setting cn cn
C) financial statement cn
D) financial accounting cn
Answer: D
cn c n
Diff: 2 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS c n
AACSB: Application of knowledge
c n c n cn cn
2
Copyright © 2022 Pearson Education, Inc.
cn cn cn cn cn
, 12) Which element of financial accounting involves identifying the individuals who demand financia
cn cn cn cn cn cn cn cn cn cn cn
l information?
cn
A) financial information cn
B) economic entity cn
C) user groups cn
D) legal, economic, political, and social environment
cn cn cn cn cn c
nAnswer: C c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
13) Which of the following is not one of the four basic financial statements?
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A) balance sheet cn
B) trial balance cn
C) cash flows statement
cn cn
D) statement of comprehensive income cn cn cn c
Answer: B
n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
14) Which organization is responsible for promulgating U.S. GAAP?
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A) Financial Accounting Standards Board cn cn cn
B) Public Company Accounting Oversight Board
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C) International Accounting Standards Board cn cn cn
D) Securities and Exchange Commission cn cn cn c
Answer: A
n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
15) Which organization is responsible for setting auditing standards and overseeing the audits of publi
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c companies in the United States?
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A) Financial Accounting Standards Board cn cn cn
B) Public Company Accounting Oversight Board
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C) American Institute of Certified Public Accountants
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D) Securities and Exchange Commission cn cn cn c
Answer: B
n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP c n
AACSB: Application of knowledge
c n c n cn cn
3
Copyright © 2022 Pearson Education, Inc.cn cn cn cn cn
cn cn cn
Chapter 1 The Financial Reporting Environment
cn cn cn cn
1.1 Overview of Financial Reporting cn cn cn
1) The financial reporting process generates three basic financial statements
cn cn cn cn cn cn cn cn
. Answer: FALSE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
2) The demand for financial information is based on market participant demand
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. Answer: TRUE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
3) Managers of economic entities are best considered to be users of financial information
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. Answer: FALSE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
4) Managers of economic entities are best considered to be preparers of financial information
cn cn cn cn cn cn cn cn cn cn cn cn
. Answer: TRUE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
5) The Securities and Exchange Commission (SEC) regulates financial reporting for publicly trade
cn cn cn cn cn cn cn cn cn cn cn
d companies.
cn
Answer: TRUE c n c n
Diff: 2 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP c n
AACSB: Application of knowledge
c n c n cn cn
6) The FASB gives the SEC authority to regulate accounting for publicly traded companies
cn cn cn cn cn cn cn cn cn cn cn cn
. Answer: FALSE
cn c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP c n
AACSB: Application of knowledge
c n c n cn cn
1
Copyright © 2022 Pearson Education, Inc.
cn cn cn cn cn
,7) The Public Company Accounting Oversight Board (PCAOB) sets financial accounting standards an
cn cn cn cn cn cn cn cn cn cn cn
d oversees the audits of public companies in the United States.
cn cn cn cn cn cn cn cn cn cn
Answer: FALSE c n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP c n
AACSB: Application of knowledge
c n c n cn cn
8) Financial accounting standards influence the behavior of managers and other internal users
cn cn cn cn cn cn cn cn cn cn cn
. Answer: TRUE
cn c n
Diff: 2 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS c n
AACSB: Application of knowledge
c n c n cn cn
9) Theories and procedures that evolve as a result of lobbying from various groups are examples
cn cn cn cn cn cn cn cn cn cn cn cn cn cn cn
of proactive factors within the legal, economic, political, and social environment.
cn cn cn cn cn cn cn cn cn cn
Answer: FALSE c n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS c n
AACSB: Application of knowledge
c n c n cn cn
10) Financial information includes information that is not governed by rules set forth by the accountin
cn cn cn cn cn cn cn cn cn cn cn cn cn cn
g standard-setting bodies.
cn cn
Answer: TRUE c n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS c n
AACSB: Application of knowledge
c n c n cn cn
11) What is the term that describes the process of identifying, measuring, and communicating financia
cn cn cn cn cn cn cn cn cn cn cn cn cn
l information about an economic entity to various user groups?
cn cn cn cn cn cn cn cn cn
A) financial reporting cn
B) accounting standard setting cn cn
C) financial statement cn
D) financial accounting cn
Answer: D
cn c n
Diff: 2 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS c n
AACSB: Application of knowledge
c n c n cn cn
2
Copyright © 2022 Pearson Education, Inc.
cn cn cn cn cn
, 12) Which element of financial accounting involves identifying the individuals who demand financia
cn cn cn cn cn cn cn cn cn cn cn
l information?
cn
A) financial information cn
B) economic entity cn
C) user groups cn
D) legal, economic, political, and social environment
cn cn cn cn cn c
nAnswer: C c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
13) Which of the following is not one of the four basic financial statements?
cn cn cn cn cn cn cn cn cn cn cn cn
A) balance sheet cn
B) trial balance cn
C) cash flows statement
cn cn
D) statement of comprehensive income cn cn cn c
Answer: B
n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
14) Which organization is responsible for promulgating U.S. GAAP?
cn cn cn cn cn cn cn
A) Financial Accounting Standards Board cn cn cn
B) Public Company Accounting Oversight Board
cn cn cn cn
C) International Accounting Standards Board cn cn cn
D) Securities and Exchange Commission cn cn cn c
Answer: A
n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP/IFRS
c n
AACSB: Application of knowledge
c n c n cn cn
15) Which organization is responsible for setting auditing standards and overseeing the audits of publi
cn cn cn cn cn cn cn cn cn cn cn cn cn
c companies in the United States?
cn cn cn cn cn
A) Financial Accounting Standards Board cn cn cn
B) Public Company Accounting Oversight Board
cn cn cn cn
C) American Institute of Certified Public Accountants
cn cn cn cn cn
D) Securities and Exchange Commission cn cn cn c
Answer: B
n c n
Diff: 1 cn
Objective: 1.1 IFRS/GA c n cn
AP: GAAP c n
AACSB: Application of knowledge
c n c n cn cn
3
Copyright © 2022 Pearson Education, Inc.cn cn cn cn cn
