Question 1

Product costs include each of the following except

Accepted Answer

A)   overhead.
B)   officer's salaries.
C)   material.
D)   labor.E) C) and D)
F) A) and D)

Question 2

In matters of doubt and great uncertainty, accounting issues should be resolved by choosing the alternative that has the least favorable effect on net income, assets, and owners' equity. This guidance comes from

Accepted Answer

A)   the cost constraint.
B)   the industry practices constraint.
C)   prudence or conservatism.
D)   the full disclosure principle.E) A) and D)
F) B) and C)

Question 3

The IASB and the FASB are working on a joint project that has an objective of developing a conceptual framework that leads to standards that are:

Accepted Answer

A)   rule-based and internally consistent.
B)   principle-based and internally consistent.
C)   rule-based and flexible in nature.
D)   principle-based and rigid in nature.E) B) and D)
F) A) and C)

Question 4

Timeliness and neutrality are two ingredients of relevance.

Accepted Answer

A) True 
 B)False

Question 5

The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favor of understating assets and revenues and overstating liabilities and expenses is known as

Accepted Answer

A)   prudence or conservatism.
B)   the materiality concept.
C)   the substance over form principle.
D)   the industry practices concept.E) A) and B)
F) A) and C)

Question 6

Which accounting assumption or principle is being violated if a company reports its corporate headquarter building at its fair value on the balance sheet?

Accepted Answer

A)   Going concern.
B)   Monetary unit.
C)   Historical cost.
D)   Full disclosure.E) B) and D)
F) All of the above

Question 7

According to the FASB conceptual framework, which of the following elements describes transactions or events that affect a company during a period of time?

Accepted Answer

A)   Assets.
B)   Expenses.
C)   Equity.
D)   Liabilities.E) B) and C)
F) A) and D)

Question 8

The IASB has issued a conceptual framework and has agreed to develop a common conceptual framework with the FASB.

Accepted Answer

A) True 
 B)False

Question 9

Company A issuing its annual financial reports within one month of the end of the year is an example of which enhancing quality of accounting information?

Accepted Answer

A)   Comparability.
B)   Timeliness.
C)   Understandability.
D)   Verifiability.E) All of the above
F) None of the above

Question 10

Financial information demonstrates consistency when

Accepted Answer

A)   firms in the same industry use different accounting methods to account for the same type of transaction.
B)   a company changes its estimate of the salvage value of a fixed asset.
C)   a company fails to adjust its financial statements for changes in the value of the measuring unit.
D)   None of these answer choices are correct.E) B) and C)
F) A) and B)

Question 11

A company has a performance obligation when it agrees to

Accepted Answer

A)   perform a service for a customer and receives cash payment.
B)   sell a product to a customer after receiving payment.
C)   perform a service or sell a product to a customer.
D)   None of the answer choices are correct.E) All of the above
F) A) and D)

Question 12

Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information?

Accepted Answer

A)   Consistency.
B)   Verifiability.
C)   Timeliness.
D)   Comparability.E) All of the above
F) C) and D)

Question 13

Issuance of common stock for cash affects which basic element of financial statements?

Accepted Answer

A)   Revenues.
B)   Losses.
C)   Liabilities.
D)   Equity.E) B) and D)
F) B) and C)

Question 14

Which of the following is not a benefit associated with the FASB Conceptual Framework Project?

Accepted Answer

A)   A conceptual framework should increase financial statement users' understanding of and confidence in financial reporting.
B)   Practical should be more quickly solvable by reference to an existing conceptual framework.
C)   A coherent set of accounting standards and rules should result.
D)   Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.E) A) and D)
F) A) and B)

Question 15

The monetary unit assumption is a part of GAAP, but not IFRS.

Accepted Answer

A) True 
 B)False

Question 16

The FASB's conceptual framework classifies gains and losses based on whether they are related to an entity's major ongoing or central operations. These gains or losses may be classified as

Accepted Answer

The answer of The FASB's conceptual framework classifies gains and...

Question 17

Verifiability and predictive value are two ingredients of faithful representation.

Accepted Answer

A) True 
 B)False

Question 18

Where is materiality not used in providing financial information?

Accepted Answer

A)   Applying the revenue recognition principle.
B)   Determining what items to include in the financial statements.
C)   Applying the going concern assumption.
D)   Determining the level of disclosure.E) C) and D)
F) All of the above

Question 19

Supplementary information may include details or amounts that present a different perspective from that adopted in the financial statements.

Accepted Answer

A) True 
 B)False

Question 20

According to Statement of Financial Accounting Concepts No. 2, neutrality is an ingredient of the fundamental quality of

Accepted Answer

The answer of According to Statement of Financial Accounting Concepts...

Exam 2: Conceptual Framework for Financial Reporting

In matters of doubt and great uncertainty, accounting issues should be resolved by choosing the alternative that has the least favorable effect on net income, assets, and owners' equity. This guidance comes from

Correct AnswerverifiedShow Answer

The monetary unit assumption is a part of GAAP, but not IFRS.

Correct AnswerverifiedShow Answer

Which of the following is not a benefit associated with the FASB Conceptual Framework Project?

Correct AnswerverifiedShow Answer

Financial information demonstrates consistency when

Correct AnswerverifiedShow Answer

The IASB and the FASB are working on a joint project that has an objective of developing a conceptual framework that leads to standards that are:

Correct AnswerverifiedShow Answer

Company A issuing its annual financial reports within one month of the end of the year is an example of which enhancing quality of accounting information?

Correct AnswerverifiedShow Answer

Product costs include each of the following except

Correct AnswerverifiedShow Answer

Issuance of common stock for cash affects which basic element of financial statements?

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According to the FASB conceptual framework, which of the following elements describes transactions or events that affect a company during a period of time?

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Where is materiality not used in providing financial information?

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Verifiability and predictive value are two ingredients of faithful representation.

Correct AnswerverifiedShow Answer

Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information?

Correct AnswerverifiedShow Answer

The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favor of understating assets and revenues and overstating liabilities and expenses is known as

Correct AnswerverifiedShow Answer

The IASB has issued a conceptual framework and has agreed to develop a common conceptual framework with the FASB.

Correct AnswerverifiedShow Answer

Timeliness and neutrality are two ingredients of relevance.

Correct AnswerverifiedShow Answer

The FASB's conceptual framework classifies gains and losses based on whether they are related to an entity's major ongoing or central operations. These gains or losses may be classified as

Correct AnswerverifiedShow Answer

A company has a performance obligation when it agrees to

Correct AnswerverifiedShow Answer

According to Statement of Financial Accounting Concepts No. 2, neutrality is an ingredient of the fundamental quality of

Correct AnswerverifiedShow Answer

Which accounting assumption or principle is being violated if a company reports its corporate headquarter building at its fair value on the balance sheet?

Correct AnswerverifiedShow Answer

Supplementary information may include details or amounts that present a different perspective from that adopted in the financial statements.

Correct AnswerverifiedShow Answer

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