CONCEPTUAL FRAMEWORK,STANDARDS,STANDARD SETTING

Question 1

What is the purpose of information presented in notes to the financial statements?

Answer 1

To provide disclosures required by generally accepted accounting principles

Question 2

The Government Accounting Standards Board (GASB) is the body authorized to promulgate standards of financial accounting and reporting for:

Answer 2

governmental units.

Question 3

How is the Form 10-Q filed with the SEC?

Answer 3

This form must be filed electronically on EDGAR unless this filing causes hardship on the filing company.

Question 4

The SEC’s rulemaking procedures identified on their website include which of the following steps?

Answer 4

Rule adoption

Question 5

During a period when an enterprise is under the direction of a particular management, its financial statements will directly provide information about:

Answer 5

enterprise performance but not directly provide information about management performance.

Question 6

Consolidated financial statements are typically prepared when one company has a controlling financial interest in another, unless:

Answer 6

such control does not rest with the majority owner because the subsidiary is in bankruptcy.

Question 7

required as part of the filing of the Form 10-Q

Answer 7

1. A list of “material events” that have occurred with the company
2. A discussion from the management
3. Financial statements

Question 8

SEC Regulation S-X provides guidance for the issuer regarding:

Answer 8

format and content of financial information submitted to the SEC.

Question 9

are qualitative characteristics that enhance the usefulness of information that is relevant and faithfully represented.

Answer 9

Comparability, verifiability, timeliness, and understandability

Question 10

Confirmatory value is a component of

Answer 10

relevance.

Question 11

At the end of the accounting period, the components of other comprehensive income are transferred to which of the following stockholders’ equity accounts?

Answer 11

Accumulated other comprehensive income

Question 12

How can forfeited nonvested accounts of an employee benefit plan be used?

Answer 12

forfeited nonvested accounts—specifically, identification of those amounts that are used to reduce future employer contributions, expenses, or reallocated to participant’s accounts, in accordance with plan documents.

Question 13

reported as a decrease in the statement of changes in net assets available for benefits of an employee benefits plan?

Answer 13

Benefits paid to participants

Question 14

GASB 1600.103 requires governmental entities to issue which two sets of financial statements?

Answer 14

The statement of net position and the statement of activities

Question 15

included on a statement of changes in equity

Answer 15

The impact of the transactions on the number of shares of stock, if any, is presented in the descriptions to the left.
Events changing stockholders’ equity accounts are listed chronologically to the left.
Column headings identify individual stockholders’ equity accounts.

Question 16

FASB ASC 274-10-35-11 states that nonforfeitable rights to receive future sums that have all the following characteristics shall be presented as assets at their discounted amounts:

Answer 16

The rights are for fixed or determinable amounts.
• The rights are not contingent on the holder’s life expectancy or the occurrence of a particular event, such as disability or death.
• The rights do not require future performance of service by the holder.

Question 17

How should a gain from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method?

Answer 17

In operating activities as a deduction from income

Question 18

Reporting inventory at the lower of cost or market is a departure from the accounting principle of:

Answer 18

historical cost.

Question 19

best describes an operating procedure for issuing a new Financial Accounting Standards Board (FASB) Accounting Standards Update?

Answer 19

An update is issued only after a majority vote by the members of the FASB.

Question 20

entity develops and distributes accounting standards for non-U.S. companies?

Answer 20

IASB

Question 21

The use of International Financial Reporting Standards is required by:

Answer 21

The International Accounting Standards Board (IASB)

Question 22

accounting bases may be used to prepare financial statements in conformity with a comprehensive basis of accounting other than generally accepted accounting principles?

Answer 22

I. Basis of accounting used by an entity to file its income tax return
II. Cash receipts and disbursements basis of accounting

Question 23

the modified cash basis of accounting is

Answer 23

The modified cash basis is a hybrid method that combines features of both the cash basis and the accrual basis.
The resulting balance sheet would include long-term assets, accumulated depreciation, and a liability for income taxes.
Modifications to the cash basis accounting include such items as the capitalization of assets and the accrual of income taxes

Question 24

The University of Tulsa, a private institution, is required to report under the standards of which of the following bodies?

Answer 24

PrimarilyFASB

Question 25

entity develops and distributes accounting standards for nongovernmental, nonprofit entities?

Answer 25

FASB

Question 26

Must be included in a company’s summary of significant accounting policies in the notes to the financial statements?

Answer 26

Revenue recognition policies

Question 27

On December 31, 20X1, Date Co. awaits judgment on a lawsuit for a competitor’s infringement of Date’s patent. Legal counsel believes it is probable that Date will win the suit and indicated the most likely award together with a range of possible awards. How should the lawsuit be reported in Date’s 20X1 financial statements?

Answer 27

In note disclosure only

Question 28

If Date Co. wins the lawsuit, the award paid to Date will be a

Answer 28

Gain

Question 29

an acceptable method to report taxable income?

Answer 29

Cash basis

Accrual basis
The hybrid method

Question 30

What types of rules are generally issued by the SEC?

Answer 30

The SEC issues Financial Reporting Releases that usually agree with U.S. GAAP.

Question 31

The entity’s first IFRS financial statements must contain an

Answer 31

explicit and unreserved statement that the financial statements are in compliance with IFRSs.

Question 32

is the accounting process that recognizes the value of assets or liabilities and related revenues, expenses, gains, and losses, whether received or paid in cash or by credit, barter, or other means

Answer 32

Accural

Question 33

involves future cash receipts and payments and may involve the use of an estimate as to the value of a transaction

Answer 33

Accural

Question 34

property or services received are included in gross income when actually or constructively received. Cash or checks received are considered gross income

Answer 34

Under the cash basis—or cash receipts method

Question 35

The rulemaking process usually begins with a

Answer 35

rule proposal

Question 36

advances specific objectives and methods for achieving them.

Answer 36

Rule Proposal:

Question 37

Rulemaking can involve several steps

Answer 37

Concept Release
Rule Proposal
Rule Adoption

Question 38

Financial statements provide direct information about enterprise performance because the primary focus

Answer 38

of the statements is to provide information about the financial performance of that enterprise by providing information about earnings.

Question 39

Is cash available for current operations. It is the most liquid asset; accordingly, it is listed first in the current assets section

Answer 39

Unrestricted cash

Question 40

is all cash not designated or available for use in current operations.

Answer 40

Restricted Cash