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The definition of assets establishes what types of economic factors will appear in the
balance sheet.
Accounting regulation prevents fraud.
There are only a few examples of accounting standards that emphasize the effects of
transactions on the income statement to the exclusion of their impact on the balance
sheet.
SFAS No. 52 adopted a currency U.S. dollar orientation to accounting for foreign
currency operations.
The funds flow statement included only transactions affecting fund accounts.
Specific price level indexes can be used to estimate the prices of assets in current year
dollars.
Amounts recognized as revenue on the financial statements but not yet included in tax
income generate deferred tax assets.
The definitions of SFAC No. 6 are virtually identical to those in SFAC No. 3 except that
they are extended to nonbusiness organizations.
Replacement cost as a measure of asset value is generally more reliable than historical
cost.
According to the clean surplus accounting, ending book value of equity equals
beginning book value plus earnings.
Only a few examples of inductively derived theories are present in accounting
literature.
An argument supporting regulated markets is that more and better regulation is
necessary to raise the quality of financial reporting in order to protect the public from
frauds and failures.
Critical accounting discourages active social roles for accountants.
Principles are basic assumptions concerning the business environment.
Although there are exceptions, revenue is generally recognized at the time cash is
collected.
Moonitz felt that APB Statement 4 should have been issued as an opinion rather than as
a statement because departures from GAAP made in a statement did not have to be
disclosed.
In SFAS No. 87, the asset-liability orientation is evident in both expense measurement
and the balance sheet recognition of unfunded pension benefits.
An argument supporting accounting regulation is that the production costs of mandatory
reporting requirements may be small since most of the basic information is produced as
a by-product of internal accounting systems.
With pooling of interests, total stockholders' equity of the combined enterprise would
be equal to the sum of the separate companies' equities immediately prior to the
combination.
Which of the following countries is a continental nation, but more closely follows the
Anglo-Saxon financial reporting model.
a. France
b. Japan
c. The Netherlands
d. Australia
Which of the following accounting research approaches arose as a result of the
perceived separation of interests in the modern corporation between management and
ownership interests?
a. Capital markets research
b. Behavioral research
c. Agency theory
d. Information economics
The SEC drafted report required by Sarbanes-Oxley used which of the following terms
to refer to a principles-based approach to standards?
a. Bright line standards
b. Rule oriented standards
c. Objective oriented standards
d. Systematic and rational standards
What was the intent of APB Opinion No. 27?
a. To achieve near symmetry in lessee and lessor accounting
b. To expand the use of the material-equity method
c. To broaden the criteria for capitalization
d. To restrict the criteria for capitalization
Comprehensive tax allocation is an example of:
a. Finite uniformity.
b. Rigid uniformity.
c. Flexible uniformity.
d. None of the above
The qualitative characteristics of accounting information detailed in the conceptual
framework proceeded directly from which of the following documents?
a. The Trueblood Report
b. SATTA
c. APB Statement 4
d. ASOBAT
Which of the following statements applies to the capital asset pricing model?
a. It assumes that individual securities are priced solely on unsystematic risk.
b. It uses beta to represent unsystematic risk of individual securities.
c. It assumes that if the rate of return on an individual security is greater than the market
average, systematic risk of the security must be smaller.
d. It assumes that if beta equals 1, the systematic risk of an individual security is equal
to the average risk of the market as a whole.
What was the main argument of ARB 36?
a. ERISA did not create a pension liability except in the likelihood of plan termination.
b. The cost of providing pension benefits should be spread over the remaining service
life of employees.
c. Pension expense should be computed using any one of five acceptable accumulated
benefit methods, regardless of cash contributions.
d. The balance sheet should report unfunded vested benefits.
What was the purpose of APB Statement 4, Basic Concepts and Accounting Principles
Underlying Financial Statements of Business Enterprises?
a. To provide a foundation for evaluating existing accounting practices
b. To assist in solving accounting problems and to guide the future development of
financial accounting
c. To enhance understanding of the purposes of financial accounting
d. All of the above
Which of the following is a true statement?
a. Shortly after its inception, the FASB issued an exposure draft that proposed requiring
the presentation of, as supplemental information, the balance sheet and income
statement restated in units of general purchasing power.
b. The Trueblood Commission committed itself to support of the current value concept.
c. In ASR 190, the SEC reinforced its long-standing position of forbidding the
presentation of information other than historical cost.
d. The AAA has always opposed price-level restated financial statements.
Which of the following is not a true statement regarding comprehensive income tax
allocation?
a. Tax allocation is made necessary by the timing differences between when an item
reaches the income statement and when it appears on the tax return.
b. The difference between the income tax expense and the income tax liability numbers
appears on the income statement.
c. When timing differences arise, tax allocation must take place, despite the possibility
of relevant circumstantial differences.
d. Permanent differences between financial statements and tax returns are not subject to
the allocation process.
Which of the following lease treatments interprets the lease contract as an operating
lease?
a. A rental agreement
b. A loan equivalent
c. A sale equivalent
d. A purchase
Which of the following are characteristics of the FASB?
a. It is part of the AICPA.
b. Members are part-time employees of the FASB.
c. A member must be a CPA.
d. It makes more extensive use of research than its predecessors.
Which of the following is not a true statement regarding SFAS No. 52?
a. The key question brought up in SFAS No. 52 involves how to report exchange gains
and losses on the income statement.
b. The six guidelines or economic factors provided by SFAS No. 52 for determining the
functional currency have a differential cash flow orientation.
c. The six indicators provided by SFAS No. 52 have been found to provide adequate
guidance for determining the functional currency.
d. The six indicators provided by SFAS No. 52 for determining the functional currency
have a foreign currency component and a parent's currency component.
Life-cycle theory argues that:
a. Regulation eventually becomes an instrument for protecting the information users.
b. The regulatory body often protects the regulated group from competition.
c. Regulation goes through several phases, but is never in the public interest.
d. Both b and c.
The three forms of the efficient-markets hypothesis are:
a. Weak, semistrong, strong.
b. Slow, quick, instantaneous.
c. Past, current, future.
d. Private, semipublic, public.
Which of the following standard-setting bodies was the first to address translation of
foreign-based operations and holdings into U.S. dollars?
a. CAP
b. APB
c. FASB
d. SEC
Which of the following concepts was referred to as a convention in SFAC No. 2?
a. Consistency
b. Materiality
c. Comparability
d. Conservatism
Which of the following is a true statement regarding a specific price index?
a. Its computation does not require statistical sampling.
b. It is narrowly constructed to determine the changing level of prices in a particular
segment of the economy.
c. It is broadly constructed for ascertaining the change in prices for all goods and
services.
d. It cannot be used to compute price-level adjusted historical cost.
Which of the following is not a true statement regarding ARS 1 and ARS 3?
a. The authors were commissioned to find postulates and principles that would lead to a
measure of true income.
b. The postulates were not complete and could not exclude all value systems other than
the one prescribed in the principles.
c. The authors were able to identify a single concept of income that was superior to
others.
d. Nothing is said about the users of accounting information and what their needs and
abilities might be.
Which of the following is not true regarding SATTA?
a. It attempted to develop metatheoretical guidelines for the evaluation of accounting
information and valuation systems.
b. It took into account the many valuation systems of accounting as well as other
theoretical considerations.
c. It enumerated the reasons why it was impossible to develop criteria that would enable
the profession to unequivocally accept a single valuation system for accounting.
d. It was commissioned by the AAA.
Which of the following is not one of the capitalization tests now applicable to both
lessees and lessors?
a. Title passes to the lessee at the end of the lease term.
b. The lease contract contains a bargain purchase option.
c. The lease term is at least 75 percent of estimated useful life.
d. Lease agreement is noncancellable for a long term.
