A chart of accounts is an example of an ordinal classification.
Inflation has posed the single greatest problem that is faced in accounting theory.
A sale and leaseback occurs when the owner of an asset sells it and enters into a lease
agreement to lease the asset back.
Agency theory studies are always inductive.
SFAS No. 96 switched from the revenue-expense (matching) orientation of APB
Opinion No. 11 to the asset-liability viewpoint.
Discuss the regulation question in terms of determining and meeting the demand for
accounting information. Who pays for and who benefits from accounting information?
The ASEAN is a group of developing nations in southeast Asia whose goal is to foster
trade and development both within and outside the region.
Inductive research in accounting can help to shed light on relationships and phenomena
existing in the business environment.
According to SFAS No. 115, the fair market value method applies for investments of
less than 50 percent where market values are readily determinable
An important role of the AICPA is to curb ‘shopping for accounting principles.”
Accounting standards for intercorporate equity investments represent the most
extensive application of flexible uniformity in accounting practice.
If a lease is interpreted as a mutually unperformed executory contract, it can be argued
that an asset and liability do not exist for the lessee.
The first lease accounting standard was issued in 1966.
Accounting-based ratios have not been very useful in discriminating between firms that
subsequently went bankrupt and those that did not.
Circumstantial variables are environmental conditions that possess which of the
following qualities?
a. Excessive measurement costs
b. A high degree of verifiability relative to other accounting methods
c. Both a and b
d. None of the above
A _________ occurs when the shares of two or more subsidiaries are distributed to the
combinor’s shareholders in exchange for all of the parent’s shares with the parent then
liquidated.
a. Spin-off
b. Split-off
c. Split-up
d. Sell-off
Which of the following is NOT true regarding the passage of the Sarbanes-Oxley
(SOX) Act?
a. SOX more clearly defined auditor independence.
b. SOX was intended to erode public confidence in the accounting profession due to
recent scandals.
c. SOX replaced peer review with inspection by the PCAOB
d. SOX implementation became the immediate focus of public companies and CPA
firms.
Which of the following concepts holds that voluntary disclosure is necessary in order
for a firm to compete successfully in the market for risk capital?
a. Signalling theory
b. Agency theory
c. Information symmetry
d. Private contracting
Which qualitative characteristic pertains wholly to the attitude of board members as
opposed to being more directly concerned with specific aspects of information
contained in the financial statements?
a. Representational faithfulness
b. Verifiability
c. Consistency
d. Neutrality
In the statement of changes in financial position, sources of resources are defined as:
a. Transaction debits.
b. Fund increases.
c. Transaction credits.
d. Fund decreases.
Which of the following is not a true statement regarding SFAS No. 8?
a. SFAS was faithful to the historical cost accounting model, but from an economic
viewpoint, it produced illogical results.
b. SFAS No. 8 required the temporal method of translation.
c. In empirical studies made of the economic impact of SFAS No. 8 on American
multinational enterprises, only foreign exchange risk and management policies
regarding hedging of foreign currency exposures were found to have any possible
impact.
d. SFAS No. 8 was consistent with the foreign currency orientation.
Respond to the following:
a. Why has so much attention been given to leases in accounting standards?
b. Why is leasing such a popular method of acquiring assets?
c. How have accounting procedures for leases changed since ARB 43?
Which of the following directly preceded the statement of changes in financial
position?
a. The statement of cash flows
b. The funds flow statement
c. The sources and uses of funds statement
d. The sources and uses of resources statement
Which of the following concepts holds that anyone who genuinely desires information
about a firm is able to obtain it?
a. Signalling theory
b. Agency theory
c. Information symmetry
d. Private contracting
Which of the following is not a finding of previous empirical research on income tax
allocation?
a. Income using income tax allocation had a higher degree of association with security
price behavior than income determined without income tax allocation.
b. The net-of-tax method using a tax rate significantly higher than existing rates had a
higher association with security prices than income tax allocation using existing rates.
c. There was a better association of net deferred tax liabilities to firm value under SFAS
No. 109 than under its predecessor when tax rates increased under the Revenue
Reconciliation Act of 1993.
d. Investors do not view deferred tax liabilities as real liabilities.
Which of the following is not true regarding an equity carve-out?
a. It can result in the creation of minority interests.
b. It arises when a combinor sells a portion of its interest in a combinee.
c. It arises when a combinor dilutes its interest through an initial public offering of the
subsidiary.
d. The SEC requires resulting carve-out gains to be booked as non-operating income.
e. It can result in the creation of minority interests.
Which of the following characterizes the United Nations involvement in financial
reporting?
a. The UN has developed significant regulations relative to financial reporting for
multinationals.
b. The US and the UK have expressed a desire to have the UN participate in developing
qualifications to sit for professional accounting exams.
c. The UN has shown interest in prescribing an accounting curriculum.
d. The UN has had a greater role in establishing international accounting standards than
the IASB.
Which of the following criteria has been most used by standard-setting bodies as the
basis for evaluating the level of investor influence?
a. Controlling influence on the board of directors
b. Operating control
c. Managerial control
d. Percentage of voting stock owned
An externality exists if:
a. A producer of a good is unable to impose production costs on all users of the good.
b. True market demand for a good is revealed in the market place.
c. Production of a good equals true market demand.
d. The production of a good is regulated.