,Chapterm1—
ANmINTRODUCTIONmTOmACCOUNTINGmTHEORY
TRUE/FALSE
1. Financialmaccountingmrefersmtomaccountingminformation mthatmismusedmby mmanagementmformdecisi
on-mmakingmpurposes.
ANSWER: F
2. Accountingmtheorymincludesmthembasicmrules,mdefinitions,mandmprinciplesmthatmunderliemthemdrafting
mof maccountingmstandards mand mhowmthey mare mderived.
ANSWER: T
3. Accountingmtheory mincludesmconceptualmframeworks,maccountingmlegislation,mvaluationmmodel
s,mand mhypothesesmand mtheories.
ANSWER: T
4. Hypothesesmand mtheoriesmarembased mon man minformalmmethod mof minvestigation.
ANSWER: F
5. Replacementmcostmasmammeasure mof massetmvaluemismgenerally mmoremreliablemthan mhistoricalmcost.
ANSWER: F
6. Accountingmtheory mismdeveloped mand mrefined mby mthemprocessmof maccountingmresearch.
ANSWER: T
7. Indirectmmeasuresmaremusuallympreferablemtomdirectmmeasuresmbecause mthey maremlessmcostly mto mobtain.
ANSWER: F
8. Assessmentmmeasuresmaremconcerned mwith mparticularmattributesmofmobjectsmand maremalwaysmdir
ectmmeasurements.
ANSWER: F
9. When mamdirectmassessmentmmeasure mismused,mtheremismalwaysmonly monemcorrectmmeasure.
ANSWER: F
10. Themsimplestmtypemof mmeasuringmsystemmismthemnominalmscale.
ANSWER: T
11. Amchartmof maccountsmisman mexample mof man mordinalmclassification.
ANSWER: F
AccountingmTheory: m9 th meditio Pagem1
n mof m11
,Chapterm1—
ANmINTRODUCTIONmTOmACCOUNTINGmTHEORY
12. Numeralsmassignedmin mordinalmrankingsmindicateman mordermofmpreferencemwheremthemdegree
mof mpreference mamongmranks mismthe msame.
ANSWER: F
13. In mamratio mscale,mthemzerompointmimpliesm“nothingness,”mormthemabsencemofmthemquality mb
eingmmeasured.
ANSWER: T
14. Usingmratio mscale,mmeasurementmismpossible min maccounting.
ANSWER: T
15. Objectivity mmay mbemdefined masmthemdegreemof mconsensusmamongmmeasurers.
ANSWER: T
16. Assessmentmmeasuresmaremnotmconcerned mwith mparticularmattributesmof mobjects.
ANSWER: F
17. Prediction mmeasuresmaremconcerned mwith mfactorsmthatmmay mbemindicative mof mfuturemconditions.
ANSWER: T
18. Timelinessmandmcostmarempertinentmto massessmentmmeasuresmbutmaremnotmpertinentmto mpredict
ion mmeasures.
ANSWER: F
19. Allmaccountingmmeasurementsmaremof meithermthemassessmentmormthemprediction mvariety.
ANSWER: T
20. Themneedmforminformation monmamtimelymbasismmay mconflictmwith mcostmconstraintsmin msomemsituations.
ANSWER: T
21. Themtermsmcalculationmandmmeasurementmbothmrefermtomthemvaluation mofmamrealmphenomen
amormattribute.
ANSWER: F
22. Calculationsmattemptmto msimulatemormcomemasmclosemasmpossiblemto mthemmeasurementmof m
realmphenomena mormattributes.
ANSWER: F
AccountingmTheory: m9 th meditio Pagem2
n mof m11
, Chapterm1—
ANmINTRODUCTIONmTOmACCOUNTINGmTHEORY
23. FIFOmand mLIFOmmeasuresmofmcostmofmgoodsmsoldmandminventoriesmaremexamplesmofmcalculati
onsmrathermthan mmeasurements.
ANSWER: T
24. There maremoften mtrade-
offsmbetween mobjectivitymandmthemusefulnessmofmnumbersmgenerated mbymthemmeasurementmpro
cess.
ANSWER: T
25. Measurementmisman mintegralmpartmof maccountingmtheory.
ANSWER: T
26. ThroughoutmthemfinancialmhistorymofmthemUnitedmStates,mcurrentmvaluemhasmbeenmthemaccep
ted mvaluation msystemmformpublished mfinancialmstatements.
ANSWER: F
27. Themdiscountedmcashmflowmapproach mcan mbemusedmto mdeterminemanmobjectivemmeasurementmform
mostmassetsmand mliabilities.
ANSWER: F
28. Amgeneralmprice-
levelmadjustmentmrefersmtomthempurchasingmpowermofmthemmonetarymunitary munitmrelativemto ma
llmgoodsmand mservicesmin mthemeconomy.
ANSWER: T
29. Both mexitmvaluemandmreplacementmcostmaremvaluation msystemsmthatmfallmintomthemcurrentmva
luemcategory.
ANSWER: T
30. Themprincipalmargumentmused mto mjustifymthemreplacementmcostmsystemmovermexitmvaluesmismthatmif
mthe mgreatmmajority mof mthe mfirm’s massets mwere mnotmalready mowned, mitmwould mbe meconomically mju
stifiablemto macquire mthem.
ANSWER: T
MULTIPLEmCHOICE
1. Which mofmthemfollowingmmethodsmofmvaluingmanmassetmismbased monmthemamountmthatmamfirmmc
ould macquiremby msellingmthemasset?
a. Replacementmcost
b. Entry mvalue
c. Exitmvalue
d. Both mamand mb
mANSWER: C
AccountingmTheory: m9 th meditio Pagem3
n mof m11
ANmINTRODUCTIONmTOmACCOUNTINGmTHEORY
TRUE/FALSE
1. Financialmaccountingmrefersmtomaccountingminformation mthatmismusedmby mmanagementmformdecisi
on-mmakingmpurposes.
ANSWER: F
2. Accountingmtheorymincludesmthembasicmrules,mdefinitions,mandmprinciplesmthatmunderliemthemdrafting
mof maccountingmstandards mand mhowmthey mare mderived.
ANSWER: T
3. Accountingmtheory mincludesmconceptualmframeworks,maccountingmlegislation,mvaluationmmodel
s,mand mhypothesesmand mtheories.
ANSWER: T
4. Hypothesesmand mtheoriesmarembased mon man minformalmmethod mof minvestigation.
ANSWER: F
5. Replacementmcostmasmammeasure mof massetmvaluemismgenerally mmoremreliablemthan mhistoricalmcost.
ANSWER: F
6. Accountingmtheory mismdeveloped mand mrefined mby mthemprocessmof maccountingmresearch.
ANSWER: T
7. Indirectmmeasuresmaremusuallympreferablemtomdirectmmeasuresmbecause mthey maremlessmcostly mto mobtain.
ANSWER: F
8. Assessmentmmeasuresmaremconcerned mwith mparticularmattributesmofmobjectsmand maremalwaysmdir
ectmmeasurements.
ANSWER: F
9. When mamdirectmassessmentmmeasure mismused,mtheremismalwaysmonly monemcorrectmmeasure.
ANSWER: F
10. Themsimplestmtypemof mmeasuringmsystemmismthemnominalmscale.
ANSWER: T
11. Amchartmof maccountsmisman mexample mof man mordinalmclassification.
ANSWER: F
AccountingmTheory: m9 th meditio Pagem1
n mof m11
,Chapterm1—
ANmINTRODUCTIONmTOmACCOUNTINGmTHEORY
12. Numeralsmassignedmin mordinalmrankingsmindicateman mordermofmpreferencemwheremthemdegree
mof mpreference mamongmranks mismthe msame.
ANSWER: F
13. In mamratio mscale,mthemzerompointmimpliesm“nothingness,”mormthemabsencemofmthemquality mb
eingmmeasured.
ANSWER: T
14. Usingmratio mscale,mmeasurementmismpossible min maccounting.
ANSWER: T
15. Objectivity mmay mbemdefined masmthemdegreemof mconsensusmamongmmeasurers.
ANSWER: T
16. Assessmentmmeasuresmaremnotmconcerned mwith mparticularmattributesmof mobjects.
ANSWER: F
17. Prediction mmeasuresmaremconcerned mwith mfactorsmthatmmay mbemindicative mof mfuturemconditions.
ANSWER: T
18. Timelinessmandmcostmarempertinentmto massessmentmmeasuresmbutmaremnotmpertinentmto mpredict
ion mmeasures.
ANSWER: F
19. Allmaccountingmmeasurementsmaremof meithermthemassessmentmormthemprediction mvariety.
ANSWER: T
20. Themneedmforminformation monmamtimelymbasismmay mconflictmwith mcostmconstraintsmin msomemsituations.
ANSWER: T
21. Themtermsmcalculationmandmmeasurementmbothmrefermtomthemvaluation mofmamrealmphenomen
amormattribute.
ANSWER: F
22. Calculationsmattemptmto msimulatemormcomemasmclosemasmpossiblemto mthemmeasurementmof m
realmphenomena mormattributes.
ANSWER: F
AccountingmTheory: m9 th meditio Pagem2
n mof m11
, Chapterm1—
ANmINTRODUCTIONmTOmACCOUNTINGmTHEORY
23. FIFOmand mLIFOmmeasuresmofmcostmofmgoodsmsoldmandminventoriesmaremexamplesmofmcalculati
onsmrathermthan mmeasurements.
ANSWER: T
24. There maremoften mtrade-
offsmbetween mobjectivitymandmthemusefulnessmofmnumbersmgenerated mbymthemmeasurementmpro
cess.
ANSWER: T
25. Measurementmisman mintegralmpartmof maccountingmtheory.
ANSWER: T
26. ThroughoutmthemfinancialmhistorymofmthemUnitedmStates,mcurrentmvaluemhasmbeenmthemaccep
ted mvaluation msystemmformpublished mfinancialmstatements.
ANSWER: F
27. Themdiscountedmcashmflowmapproach mcan mbemusedmto mdeterminemanmobjectivemmeasurementmform
mostmassetsmand mliabilities.
ANSWER: F
28. Amgeneralmprice-
levelmadjustmentmrefersmtomthempurchasingmpowermofmthemmonetarymunitary munitmrelativemto ma
llmgoodsmand mservicesmin mthemeconomy.
ANSWER: T
29. Both mexitmvaluemandmreplacementmcostmaremvaluation msystemsmthatmfallmintomthemcurrentmva
luemcategory.
ANSWER: T
30. Themprincipalmargumentmused mto mjustifymthemreplacementmcostmsystemmovermexitmvaluesmismthatmif
mthe mgreatmmajority mof mthe mfirm’s massets mwere mnotmalready mowned, mitmwould mbe meconomically mju
stifiablemto macquire mthem.
ANSWER: T
MULTIPLEmCHOICE
1. Which mofmthemfollowingmmethodsmofmvaluingmanmassetmismbased monmthemamountmthatmamfirmmc
ould macquiremby msellingmthemasset?
a. Replacementmcost
b. Entry mvalue
c. Exitmvalue
d. Both mamand mb
mANSWER: C
AccountingmTheory: m9 th meditio Pagem3
n mof m11
