, TESTBANK FOR Intermediate Accounting Reporting and Analysis 5th
Edition Wahlen
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
⚠️Note on Answer Keys: If the answer key is not included within the chapter
questions, you will find the complete answers and solutions at the end of each
chapter.
✅ Why Buy From Us?
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,Name: Class: Date:
Chapter 1
True / False
1. A problem arising from when parties have the same information is called information asymmetry.
a. True
b. False
ANSWER: False
2. The demand for relevant and reliable financial information stems from the needs of the internal and external
stakeholders.
a. True
b. False
ANSWER: True
3. The mission of the Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient
markets, and facilitate capital formation.
a. True
b. False
ANSWER: True
4. The SEC uses its authority to establish accounting standards while also enforcing regulations on companies,
exchanges, and investors.
a. True
b. False
ANSWER: False
5. The Financial Accounting Standards Board (FASB) began in 1973 after the AICPA phased out the Accounting
Principles Board (APB).
a. True
b. False
ANSWER: True
6. FASB’s Emerging Issues Task Force assists and advises the FASB by identifying and addressing timely but more
narrow and specific standard setting issues.
a. True
b. False
ANSWER: True
7. The Codification is set up as a system of levels starting with sections, topics, and subtopics.
a. True
b. False
ANSWER: False
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,Name: Class: Date:
Chapter 1
8. The Codification was established to assist in reducing the time necessary to research an accounting issue and improve
the ability to utilize accounting information that conforms with GAAP.
a. True
b. False
ANSWER: True
9. A potential issue facing the convergence project is that many companies have entered into contracts based upon U.S.
GAAP financial reporting; many of these contracts will have to be renegotiated using IFRS, which potentially could
cause some companies more harm than good.
a. True
b. False
ANSWER: True
10. The balance sheet is a snapshot of a company’s financial position at a particular date.
a. True
b. False
ANSWER: True
11. The statement of shareholders' equity reports the effects from the recognition or valuation of certain asset or liability
transactions that change Accumulated Other Comprehensive Income.
a. True
b. False
ANSWER: True
12. “In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral
judgments in all their activities.” This is the Integrity Principle of the AICPA Code of Professional Conduct.
a. True
b. False
ANSWER: False
13. “Members should act in a way that will service the public interest, honor the public trust, and demonstrate
commitment to professionalism.” This is the Public Interest Principle of the AICPA’s Code of Professional Conduct.
a. True
b. False
ANSWER: True
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,Name: Class: Date:
Chapter 1
Multiple Choice
14. Creditors' information needs revolve around all of the following decisions, EXCEPT
a. extending credit.
b. maintaining a credit relationship.
c. determining the value of a company.
d. investing in common stock.
ANSWER: d
15. Which of the following is an internal user of a company's financial information?
a. Company treasurer
b. Shareholder in the company
c. Bank lending to the company
d. Union
ANSWER: a
16. After formulating a strategic plan, a company will engage in what three types of activities?
a. Planning, operating, and selling
b. Investing, operating, and selling
c. Financing, investing, and operating
d. Operating, planning, and financing
ANSWER: c
17. What is financial reporting?
a. The process of communicating internal accounting information to existing and potential investors, creditors,
lenders, and other external decision makers
b. The process of communicating financial accounting information to existing and potential investors, creditors,
lenders, and other external decision makers
c. The process of preparing financial accounting information
d. The process of communicating the strategic plan to existing and potential investors, creditors, lenders, and other
external decision makers
ANSWER: b
18. When making decisions, equity investors are interested in assessing
a. the company's ability to generate cash flows.
b. management's ability to increase shareholder value.
c. the company's ability to pay dividends.
d. all of these choices.
ANSWER: d
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,Name: Class: Date:
Chapter 1
19. Which of the following decisions would external users of financial statements be least likely to make?
a. Whether to extend credit
b. Whether to hold the company's stock
c. Whether to support management’s international expansion strategy
d. Whether to demand increased employee benefits during union negotiations
ANSWER: d
20. As a potential equity investor, what information about a company would you be least interested in discovering prior to
making an investment decision?
a. What is management's plan for the future?
b. What is the company’s future potential for profitable operations?
c. Does the company have positive cash flows?
d. What are the current employee benefits and compensation packages?
ANSWER: d
21. The primary reason that external financial reporting and internal managerial accounting have somewhat different
objectives is because they
a. need information in different formats.
b. provide information for different decisions.
c. need information in different geographic locations.
d. need information at different times.
ANSWER: b
22. Information asymmetry may cause problems because management’s behavior
a. may be to enhance the owners' financial interests at the expense of their self-interests.
b. will always follow classic agency law.
c. may not always be in alignment with the outcomes preferred by the investors and creditors.
d. as agents will always be in the best interests of the owners (shareholders).
ANSWER: c
23. Which of the following organizations has legal authority to prescribe accounting principles and reporting practices for
all corporations issuing publicly traded securities within the U.S. capital markets?
a. Accounting Principles Board
b. Securities and Exchange Commission
c. Financial Accounting Standards Board
d. International Accounting Standards Board
ANSWER: b
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,Name: Class: Date:
Chapter 1
24. Within U.S. financial reporting and capital markets, which organization has the most legal authority?
a. Financial Accounting Standards Board
b. Accounting Standards Executive Committee
c. Governmental Accounting Standards Board
d. Securities and Exchange Commission
ANSWER: d
25. Three major organizations are directly involved in developing or overseeing U.S. and international accounting
standards. They include all of the following EXCEPT the
a. EU (European Union).
b. SEC (Securities and Exchange Commission).
c. FASB (Financial Accounting Standards Board).
d. IASB (International Accounting Standards Board).
ANSWER: a
26. The Securities and Exchange Commission has the legal authority to prescribe accounting principles and reporting
practices for
a. all companies issuing publicly traded securities in U.S. capital markets.
b. all companies, both foreign and domestic, issuing any type of securities.
c. securities issued by foreign companies and traded in European markets.
d. all of these choices.
ANSWER: a
27. Which of the following is NOT a major standard-setting body responsible for the establishment of U.S. and
International Financial Reporting Standards?
a. SEC (Securities Exchange Commission)
b. PCAOB (Public Company Accounting Oversight Board)
c. FASB (Financial Accounting Standards Board)
d. IASB (International Accounting Standards Board)
ANSWER: b
28. While formally the SEC is charged with the responsibility for establishing accounting principles to be followed in the
preparation of SEC filings, the impact of the SEC generally has been in its
a. assistance to Congress with the development of tax law.
b. guidance of the development of stock exchanges.
c. ability to regulate federal and state governmental accounting practices.
d. informal review and approval of standards developed in the private sector prior to their release.
ANSWER: d
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,Name: Class: Date:
Chapter 1
29. What is the relationship between the Securities and Exchange Commission and accounting standard setting in the
United States?
a. The SEC requires all companies listed on an exchange to submit their financial statements to the SEC.
b. The SEC coordinates with the FASB in establishing accounting standards.
c. The SEC has the legal authority to establish accounting standards in U.S. capital markets but delegates
standard-setting to the FASB.
d. The SEC reviews financial statements for compliance with U.S. GAAP or IFRS.
ANSWER: c
30. The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is
NOT a commonly required report?
a. Form 10-Q, an extensive quarterly report, including financial statements
b. Form 1120, a corporate income tax return
c. Form 10-K, an extensive annual report, including financial statements
d. Form 8-K, a report used to describe significant events that may affect the company
ANSWER: b
31. Which of the following statements regarding Standards contained in the FASB Accounting Standards Codification
(ASC) is true?
a. They have the force of law, and failure to follow them can be prosecuted.
b. They apply to financial reporting by all U.S. companies.
c. They were created in 2009 when the ASC was created and did not exist prior to that time.
d. They have to be approved by the SEC before they become effective.
ANSWER: b
32. Which of the following statements is true?
a. In order to remain impartial, the FASB discourages public input during development of standards.
b. FASB accounting standards are the result of clearly defined objectives, an integrated body of theory, and the
known consequences of actions.
c. The FASB deliberates and issues accounting standards only after receiving a formal letter of request from the
SEC.
d. Accounting standards, which have economic and political consequences, are often the result of compromise.
ANSWER: d
33. Beginning in 1938 and extending to the present, which is the correct sequence of accounting rule-making bodies?
a. APB-CAP-FASB
b. CAP-FASB-APB
c. CAP-APB-FASB
d. FASB-APB-CAP
ANSWER: c
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,Name: Class: Date:
Chapter 1
34. The Financial Accounting Foundation (FAF) is the parent organization of which of the following organizations?
a. AICPA (American Institute of Certified Public Accountants)
b. AAA (American Accounting Association)
c. SIFMA (Securities Industry and Financial Markets Association)
d. FASB (Financial Accounting Standards Board)
ANSWER: d
35. The FASB is structured as a small, full-time board. How many FASB members currently make up the Board?
a. 5
b. 7
c. 21
d. 33
ANSWER: b
36. Concerning FASB membership, which statement is NOT true?
a. Not all members are CPAs from public practice.
b. All members are full time and fully paid.
c. All members are also members of the Financial Accounting Foundation.
d. All members must sever organizational ties with their previous employer.
ANSWER: c
37. Which of the following is NOT one of the stages used by the FASB process before issuing an Accounting Standards
Update?
a. Conducting research
b. Issuing an Exposure Draft
c. Obtaining approval from the SEC for the new standard
d. Holding public hearings
ANSWER: c
38. Which of the following statements about the FASB Accounting Standards Codification is NOT true?
a. The Codification is currently the only authoritative source of U.S. GAAP.
b. The purpose of creating the Codification was to simplify user access to authoritative U.S. GAAP.
c. The framework of the Codification contains six levels, which are increasingly more specific.
d. The six levels contained within the Codification framework are hierarchical in nature, such that the higher
levels are considered to be more authoritative than the lower levels.
ANSWER: d
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, Name: Class: Date:
Chapter 1
39. Which of the following statements about the FASB Accounting Standards Codification is true?
a. The Codification is maintained and accessed electronically as a centralized research system.
b. When the Codification was adopted, it caused major changes in the contents of U.S. GAAP.
c. It is reviewed and periodically updated by the SEC.
d. It is just one of a large number of authoritative pronouncements that have been issued over time, all of which
comprise U.S. GAAP.
ANSWER: a
40. The FASB Accounting Standards Codification was developed to
a. simplify user access.
b. accurately represent all authoritative U.S. GAAP.
c. create an up-to-date research system.
d. do all of these choices.
ANSWER: d
41. Which of the following statements regarding the requirement to follow U.S. GAAP in financial reporting is true?
a. U.S. GAAP has been adopted as federal law, so failure to follow U.S. GAAP is prosecuted through the federal
court system.
b. U.S. GAAP has been adopted as state law in all 50 states, so failure to follow U.S. GAAP is prosecuted
through the state court system.
c. U.S. GAAP represents a set of professional standards, and compliance is enforced through professional
standards and regulatory oversight.
d. Compliance with U.S. GAAP is not enforced; it is a voluntary choice made by most companies and by most
professional accountants.
ANSWER: c
42. Prior to FASB codification, which of the following types of FASB Pronouncements established the methods and
procedures required on specific accounting issues?
a. Staff Positions
b. Statements of Financial Accounting Standards
c. Statements of Financial Accounting Concepts
d. Technical Bulletins
ANSWER: b
43. The FASB Accounting Standards Codification includes six levels or components. Which of the following is NOT one
of those levels?
a. Area
b. Topic
c. Paragraphs
d. Subparagraphs
ANSWER: d
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Edition Wahlen
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
⚠️Note on Answer Keys: If the answer key is not included within the chapter
questions, you will find the complete answers and solutions at the end of each
chapter.
✅ Why Buy From Us?
📚 Complete & organized chapter-by-chapter – no missing content, no guessing.
⚡ Instant digital delivery – get your file the moment you pay, no waiting.
📅 Always up to date – we track new editions so you always get the latest version.
💬 Friendly support – real humans ready to help, anytime you need us.
🔒 Safe & secure – thousands of satisfied students trust us every semester.
🛡️Our Guarantees
💰 Money-Back Guarantee: Not satisfied? We offer a full refund – no questions asked.
🔄 Wrong File? No Problem: Contact us and we will replace it immediately with the
correct version, free of charge.
⏰ 24/7 Support: We are always here – reach out anytime and expect a fast response.
Contact Email:
,Name: Class: Date:
Chapter 1
True / False
1. A problem arising from when parties have the same information is called information asymmetry.
a. True
b. False
ANSWER: False
2. The demand for relevant and reliable financial information stems from the needs of the internal and external
stakeholders.
a. True
b. False
ANSWER: True
3. The mission of the Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient
markets, and facilitate capital formation.
a. True
b. False
ANSWER: True
4. The SEC uses its authority to establish accounting standards while also enforcing regulations on companies,
exchanges, and investors.
a. True
b. False
ANSWER: False
5. The Financial Accounting Standards Board (FASB) began in 1973 after the AICPA phased out the Accounting
Principles Board (APB).
a. True
b. False
ANSWER: True
6. FASB’s Emerging Issues Task Force assists and advises the FASB by identifying and addressing timely but more
narrow and specific standard setting issues.
a. True
b. False
ANSWER: True
7. The Codification is set up as a system of levels starting with sections, topics, and subtopics.
a. True
b. False
ANSWER: False
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,Name: Class: Date:
Chapter 1
8. The Codification was established to assist in reducing the time necessary to research an accounting issue and improve
the ability to utilize accounting information that conforms with GAAP.
a. True
b. False
ANSWER: True
9. A potential issue facing the convergence project is that many companies have entered into contracts based upon U.S.
GAAP financial reporting; many of these contracts will have to be renegotiated using IFRS, which potentially could
cause some companies more harm than good.
a. True
b. False
ANSWER: True
10. The balance sheet is a snapshot of a company’s financial position at a particular date.
a. True
b. False
ANSWER: True
11. The statement of shareholders' equity reports the effects from the recognition or valuation of certain asset or liability
transactions that change Accumulated Other Comprehensive Income.
a. True
b. False
ANSWER: True
12. “In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral
judgments in all their activities.” This is the Integrity Principle of the AICPA Code of Professional Conduct.
a. True
b. False
ANSWER: False
13. “Members should act in a way that will service the public interest, honor the public trust, and demonstrate
commitment to professionalism.” This is the Public Interest Principle of the AICPA’s Code of Professional Conduct.
a. True
b. False
ANSWER: True
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,Name: Class: Date:
Chapter 1
Multiple Choice
14. Creditors' information needs revolve around all of the following decisions, EXCEPT
a. extending credit.
b. maintaining a credit relationship.
c. determining the value of a company.
d. investing in common stock.
ANSWER: d
15. Which of the following is an internal user of a company's financial information?
a. Company treasurer
b. Shareholder in the company
c. Bank lending to the company
d. Union
ANSWER: a
16. After formulating a strategic plan, a company will engage in what three types of activities?
a. Planning, operating, and selling
b. Investing, operating, and selling
c. Financing, investing, and operating
d. Operating, planning, and financing
ANSWER: c
17. What is financial reporting?
a. The process of communicating internal accounting information to existing and potential investors, creditors,
lenders, and other external decision makers
b. The process of communicating financial accounting information to existing and potential investors, creditors,
lenders, and other external decision makers
c. The process of preparing financial accounting information
d. The process of communicating the strategic plan to existing and potential investors, creditors, lenders, and other
external decision makers
ANSWER: b
18. When making decisions, equity investors are interested in assessing
a. the company's ability to generate cash flows.
b. management's ability to increase shareholder value.
c. the company's ability to pay dividends.
d. all of these choices.
ANSWER: d
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,Name: Class: Date:
Chapter 1
19. Which of the following decisions would external users of financial statements be least likely to make?
a. Whether to extend credit
b. Whether to hold the company's stock
c. Whether to support management’s international expansion strategy
d. Whether to demand increased employee benefits during union negotiations
ANSWER: d
20. As a potential equity investor, what information about a company would you be least interested in discovering prior to
making an investment decision?
a. What is management's plan for the future?
b. What is the company’s future potential for profitable operations?
c. Does the company have positive cash flows?
d. What are the current employee benefits and compensation packages?
ANSWER: d
21. The primary reason that external financial reporting and internal managerial accounting have somewhat different
objectives is because they
a. need information in different formats.
b. provide information for different decisions.
c. need information in different geographic locations.
d. need information at different times.
ANSWER: b
22. Information asymmetry may cause problems because management’s behavior
a. may be to enhance the owners' financial interests at the expense of their self-interests.
b. will always follow classic agency law.
c. may not always be in alignment with the outcomes preferred by the investors and creditors.
d. as agents will always be in the best interests of the owners (shareholders).
ANSWER: c
23. Which of the following organizations has legal authority to prescribe accounting principles and reporting practices for
all corporations issuing publicly traded securities within the U.S. capital markets?
a. Accounting Principles Board
b. Securities and Exchange Commission
c. Financial Accounting Standards Board
d. International Accounting Standards Board
ANSWER: b
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,Name: Class: Date:
Chapter 1
24. Within U.S. financial reporting and capital markets, which organization has the most legal authority?
a. Financial Accounting Standards Board
b. Accounting Standards Executive Committee
c. Governmental Accounting Standards Board
d. Securities and Exchange Commission
ANSWER: d
25. Three major organizations are directly involved in developing or overseeing U.S. and international accounting
standards. They include all of the following EXCEPT the
a. EU (European Union).
b. SEC (Securities and Exchange Commission).
c. FASB (Financial Accounting Standards Board).
d. IASB (International Accounting Standards Board).
ANSWER: a
26. The Securities and Exchange Commission has the legal authority to prescribe accounting principles and reporting
practices for
a. all companies issuing publicly traded securities in U.S. capital markets.
b. all companies, both foreign and domestic, issuing any type of securities.
c. securities issued by foreign companies and traded in European markets.
d. all of these choices.
ANSWER: a
27. Which of the following is NOT a major standard-setting body responsible for the establishment of U.S. and
International Financial Reporting Standards?
a. SEC (Securities Exchange Commission)
b. PCAOB (Public Company Accounting Oversight Board)
c. FASB (Financial Accounting Standards Board)
d. IASB (International Accounting Standards Board)
ANSWER: b
28. While formally the SEC is charged with the responsibility for establishing accounting principles to be followed in the
preparation of SEC filings, the impact of the SEC generally has been in its
a. assistance to Congress with the development of tax law.
b. guidance of the development of stock exchanges.
c. ability to regulate federal and state governmental accounting practices.
d. informal review and approval of standards developed in the private sector prior to their release.
ANSWER: d
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,Name: Class: Date:
Chapter 1
29. What is the relationship between the Securities and Exchange Commission and accounting standard setting in the
United States?
a. The SEC requires all companies listed on an exchange to submit their financial statements to the SEC.
b. The SEC coordinates with the FASB in establishing accounting standards.
c. The SEC has the legal authority to establish accounting standards in U.S. capital markets but delegates
standard-setting to the FASB.
d. The SEC reviews financial statements for compliance with U.S. GAAP or IFRS.
ANSWER: c
30. The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is
NOT a commonly required report?
a. Form 10-Q, an extensive quarterly report, including financial statements
b. Form 1120, a corporate income tax return
c. Form 10-K, an extensive annual report, including financial statements
d. Form 8-K, a report used to describe significant events that may affect the company
ANSWER: b
31. Which of the following statements regarding Standards contained in the FASB Accounting Standards Codification
(ASC) is true?
a. They have the force of law, and failure to follow them can be prosecuted.
b. They apply to financial reporting by all U.S. companies.
c. They were created in 2009 when the ASC was created and did not exist prior to that time.
d. They have to be approved by the SEC before they become effective.
ANSWER: b
32. Which of the following statements is true?
a. In order to remain impartial, the FASB discourages public input during development of standards.
b. FASB accounting standards are the result of clearly defined objectives, an integrated body of theory, and the
known consequences of actions.
c. The FASB deliberates and issues accounting standards only after receiving a formal letter of request from the
SEC.
d. Accounting standards, which have economic and political consequences, are often the result of compromise.
ANSWER: d
33. Beginning in 1938 and extending to the present, which is the correct sequence of accounting rule-making bodies?
a. APB-CAP-FASB
b. CAP-FASB-APB
c. CAP-APB-FASB
d. FASB-APB-CAP
ANSWER: c
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,Name: Class: Date:
Chapter 1
34. The Financial Accounting Foundation (FAF) is the parent organization of which of the following organizations?
a. AICPA (American Institute of Certified Public Accountants)
b. AAA (American Accounting Association)
c. SIFMA (Securities Industry and Financial Markets Association)
d. FASB (Financial Accounting Standards Board)
ANSWER: d
35. The FASB is structured as a small, full-time board. How many FASB members currently make up the Board?
a. 5
b. 7
c. 21
d. 33
ANSWER: b
36. Concerning FASB membership, which statement is NOT true?
a. Not all members are CPAs from public practice.
b. All members are full time and fully paid.
c. All members are also members of the Financial Accounting Foundation.
d. All members must sever organizational ties with their previous employer.
ANSWER: c
37. Which of the following is NOT one of the stages used by the FASB process before issuing an Accounting Standards
Update?
a. Conducting research
b. Issuing an Exposure Draft
c. Obtaining approval from the SEC for the new standard
d. Holding public hearings
ANSWER: c
38. Which of the following statements about the FASB Accounting Standards Codification is NOT true?
a. The Codification is currently the only authoritative source of U.S. GAAP.
b. The purpose of creating the Codification was to simplify user access to authoritative U.S. GAAP.
c. The framework of the Codification contains six levels, which are increasingly more specific.
d. The six levels contained within the Codification framework are hierarchical in nature, such that the higher
levels are considered to be more authoritative than the lower levels.
ANSWER: d
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, Name: Class: Date:
Chapter 1
39. Which of the following statements about the FASB Accounting Standards Codification is true?
a. The Codification is maintained and accessed electronically as a centralized research system.
b. When the Codification was adopted, it caused major changes in the contents of U.S. GAAP.
c. It is reviewed and periodically updated by the SEC.
d. It is just one of a large number of authoritative pronouncements that have been issued over time, all of which
comprise U.S. GAAP.
ANSWER: a
40. The FASB Accounting Standards Codification was developed to
a. simplify user access.
b. accurately represent all authoritative U.S. GAAP.
c. create an up-to-date research system.
d. do all of these choices.
ANSWER: d
41. Which of the following statements regarding the requirement to follow U.S. GAAP in financial reporting is true?
a. U.S. GAAP has been adopted as federal law, so failure to follow U.S. GAAP is prosecuted through the federal
court system.
b. U.S. GAAP has been adopted as state law in all 50 states, so failure to follow U.S. GAAP is prosecuted
through the state court system.
c. U.S. GAAP represents a set of professional standards, and compliance is enforced through professional
standards and regulatory oversight.
d. Compliance with U.S. GAAP is not enforced; it is a voluntary choice made by most companies and by most
professional accountants.
ANSWER: c
42. Prior to FASB codification, which of the following types of FASB Pronouncements established the methods and
procedures required on specific accounting issues?
a. Staff Positions
b. Statements of Financial Accounting Standards
c. Statements of Financial Accounting Concepts
d. Technical Bulletins
ANSWER: b
43. The FASB Accounting Standards Codification includes six levels or components. Which of the following is NOT one
of those levels?
a. Area
b. Topic
c. Paragraphs
d. Subparagraphs
ANSWER: d
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