Chapter 2—Financial Reporting: Its Conceptual Framework
Student: ___________________________________________________________________________
1. Which of the following statements is not true with regard to the benefits derived from the FASB’s conceptual
framework of accounting?
2. How many Statements of Financial Accounting Concepts have been issued?
3. The first part of the conceptual framework project had to do with
4. The accounting projects portion of the FASB’s conceptual framework project deals with
5. The FASB divided its conceptual framework activities into several projects. Which of the following was not
one of those projects?
6. The accounting projects portion of the FASB’s conceptual framework project deals with all of the following
except
7. The FASB has determined that the primary focus of financial reporting about an entity’s performance is
information on
8. The FASB concluded that the most general objective of financial reporting is to
9. According to GAAP, which is not a specific objective?
10. Information about comprehensive income is useful to external users for all of the following purposes except
11. In its “Objectives of Financial Reporting by Business Enterprises” the FASB identified a variety of primary
users including all of the following except
12. GAAP emphasizes the importance of full disclosure by management including all of the following
enhancements except
13. Which of the following is a specific objective of financial reporting?
14. A primary focus of financial reporting about a company’s performance during an accounting period is
information related to the company’s
15. Accrual accounting relates the financial effects of a company’s transactions
16. Which of the following statements regarding financial flexibility is true?
17. Which of the following types of information was specifically identified by the FASB as being useful in
assessing the amounts, timing, and uncertainty of a company’s future cash flows?
18. When investors and creditors make investment and credit decisions, they need information to assist them in
assessing future cash receipts. Their focus is on assessing the potential of generating
19. Which qualitative characteristic is an ingredient of relevance?
20. According to the FASB hierarchy of qualitative characteristics, the two primary qualities making accounting
information useful are
21. Which qualitative characteristic is an ingredient of reliability?
23. In order to be relevant, accounting information should have
24. Which of the following qualitative characteristics may have to be sacrificed in order to achieve timeliness?
25. Representational faithfulness is a relationship between the reported accounting measurements or
descriptions and the economic resources, obligations, and the transactions and events causing changes in these
items. This is important because the
26. Which of the following are considered secondary characteristics of accounting information?
27. Two constraints mentioned by GAAP on qualitative characteristics are
28. Which of the following items would most likely be a violation of the materiality constraint?
Chapter 2—Financial Reporting: Its Conceptual Framework Key
1. Which of the following statements is not true with regard to the benefits derived from the FASB’s conceptual
framework of accounting?
2. How many Statements of Financial Accounting Concepts have been issued?
3. The first part of the conceptual framework project had to do with
4. The accounting projects portion of the FASB’s conceptual framework project deals with
5. The FASB divided its conceptual framework activities into several projects. Which of the following was not
one of those projects?
6. The accounting projects portion of the FASB’s conceptual framework project deals with all of the following
except
7. The FASB has determined that the primary focus of financial reporting about an entity’s performance is
information on
8. The FASB concluded that the most general objective of financial reporting is to
9. According to GAAP, which is not a specific objective?
10. Information about comprehensive income is useful to external users for all of the following purposes except
11. In its “Objectives of Financial Reporting by Business Enterprises” the FASB identified a variety of primary
users including all of the following except
12. GAAP emphasizes the importance of full disclosure by management including all of the following
enhancements except
13. Which of the following is a specific objective of financial reporting?
14. A primary focus of financial reporting about a company’s performance during an accounting period is
information related to the company’s
15. Accrual accounting relates the financial effects of a company’s transactions
17. Which of the following types of information was specifically identified by the FASB as being useful in
assessing the amounts, timing, and uncertainty of a company’s future cash flows?
18. When investors and creditors make investment and credit decisions, they need information to assist them in
assessing future cash receipts. Their focus is on assessing the potential of generating
19. Which qualitative characteristic is an ingredient of relevance?
20. According to the FASB hierarchy of qualitative characteristics, the two primary qualities making accounting
information useful are
21. Which qualitative characteristic is an ingredient of reliability?
23. In order to be relevant, accounting information should have
24. Which of the following qualitative characteristics may have to be sacrificed in order to achieve timeliness?
25. Representational faithfulness is a relationship between the reported accounting measurements or
descriptions and the economic resources, obligations, and the transactions and events causing changes in these
items. This is important because the
26. Which of the following are considered secondary characteristics of accounting information?
27. Two constraints mentioned by GAAP on qualitative characteristics are
28. Which of the following items would most likely be a violation of the materiality constraint?
29. Intracompany comparability would be violated if
30. In the FASB hierarchy of qualitative characteristics, understandability is a characteristic that is
31. The materiality of an item of financial information refers to the likelihood that its omission or misstatement
would affect the judgments of those relying on that information. This concept most closely relates to the
32. Which is not one of the four recognition criteria identified by the FASB?
33. All of the following items are classified as accounting assumptions and conventions except for
34. The city of Fairbanks sold land for its appraised value to the Big Oil Company on June 1, 2010, that
originally cost the city $1,000,000. On June 1, 2010, the land was appraised at a value of $1,250,000, and on
December 31, 2010, the land’s value was estimated to be $1,400,000. On Big Oil Company’s balance sheet at
December 31, 2010, the land should be valued at
35. According to the recognition criteria established for revenue, revenue is normally recognized
36. For fixed-price construction contracts that require more than one accounting period to complete and for
which the costs can be reasonably estimated, revenue should be recognized
37. If collectibility of the revenue is highly uncertain, an appropriate method that should be used to recognize
revenue would be
38. Using the straight-line method to amortize patents is an application of expense recognition using
39. Using an allowance method of accounting to recognize uncollectible accounts receivable is an application of
which accounting convention?
40. The state legislature is currently debating a bill that, if passed, would require the Sandiken Company to go
out of business. Which of the following principles or assumptions related to the preparation of Sandiken’s
financial statements is most directly affected by this impending vote of the legislature?
41. Under current GAAP, most resources of a business entity are to be valued in its financial statements at
42. Revenue may be recognized by an entity at the completion of production during an accounting period
43. FASB suggests that revenues are considered to be earned
44. The principle of revenue recognition results in
45. Solon Corporation has adopted the policy of charging to expense at the time of purchase all assets having a
cost of less than $100, regardless of the life expectancy of the asset. This policy is most closely related to the
46. A company that uses accounting methods in preparing its tax returns that differ from the accounting
methods used to prepare its financial statements is
47. Of the following reporting assumptions or reporting principles, the one most widely criticized is the
48. Which one of the following assumptions or principles most logically supports the preparation of a single set
of consolidated financial statements that combines the financial information of several wholly owned but
separately identifiable businesses?
49. Expenses are recognized and matched against revenues on the basis of three principles. Which of the
following is not one of these principles?