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