Intermediate Accounting 10th Edition By J David Spiceland-Test Bank

Chapter 1 Environment and Theoretical Structure of Financial Accounting

1) The primary function of financial accounting is to provide relevant financial information to parties external to business enterprises.

Answer: TRUE
Difficulty: 1 Easy
Topic: Environment of financial accounting and reporting
Learning Objective: 01-01 Describe the function and primary focus of financial accounting.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

2) Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow.

Answer: FALSE
Difficulty: 1 Easy
Topic: Cash versus accrual accounting
Learning Objective: 01-02 Explain the difference between cash and accrual accounting.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: FN Measurement / Keyboard Navigation

3) The FASB is currently the public-sector organization responsible for setting accounting standards in the United States.

Answer: FALSE
Difficulty: 1 Easy
Topic: Development of accounting and reporting standards
Learning Objective: 01-03 Define generally accepted accounting principles (GAAP) and discuss the historical development of accounting standards, including convergence between U.S. and international standards.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

4) The FASB’s due process invites various interested parties to indicate their opinions about whether financial accounting standards should be changed.

Answer: TRUE
Difficulty: 1 Easy
Topic: GAAP―Standard-setting process
Learning Objective: 01-04 Explain why establishing accounting standards is characterized as a political process.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

5) Accounting for stock-based compensation is an area in which the FASB has received little political interference.

Answer: FALSE
Difficulty: 1 Easy
Topic: GAAP―Standard-setting process
Learning Objective: 01-04 Explain why establishing accounting standards is characterized as a political process.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

6) The Public Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) changed the entity responsible for setting standards for auditing public companies in the United States.

Answer: TRUE
Difficulty: 1 Easy
Topic: Encouraging high-quality financial reporting
Learning Objective: 01-05 Explain factors that encourage high-quality financial reporting.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

7) A rules-based approach to standard-setting stresses professional judgment as opposed to following a list of rules.

Answer: FALSE
Difficulty: 1 Easy
Topic: Encouraging high-quality financial reporting
Learning Objective: 01-05 Explain factors that encourage high-quality financial reporting.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

8) Under federal securities laws, the SEC has the authority to set accounting standards in the United States.

Answer: TRUE
Difficulty: 1 Easy
Topic: Development of accounting and reporting standards
Learning Objective: 01-03 Define generally accepted accounting principles (GAAP) and discuss the historical development of accounting standards, including convergence between U.S. and international standards.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Legal / Keyboard Navigation

9) The primary responsibility for properly applying GAAP when communicating with investors and creditors through financial statements lies with a firm’s auditors.

Answer: FALSE
Difficulty: 1 Easy
Topic: Encouraging high-quality financial reporting
Learning Objective: 01-05 Explain factors that encourage high-quality financial reporting.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

10) Auditors play an important role in the resource allocation process by adding credibility to financial statements.

Answer: TRUE
Difficulty: 1 Easy
Topic: Encouraging high-quality financial reporting
Learning Objective: 01-05 Explain factors that encourage high-quality financial reporting.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

11) The purpose of the conceptual framework is to provide a structure and framework for a consistent set of GAAP.

Answer: TRUE
Difficulty: 1 Easy
Topic: Conceptual framework―Purpose
Learning Objective: 01-06 Explain the purpose of the conceptual framework.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation

12) In the United States, the conceptual framework indicates GAAP when a more specific accounting standard does not apply.

Answer: FALSE
Difficulty: 1 Easy
Topic: Conceptual framework―Purpose
Learning Objective: 01-06 Explain the purpose of the conceptual framework.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation