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Intermediate Accounting Chapter 1 Quiz

Ch 1 MC


1. Question Content AreaThe Financial Accounting Foundation (FAF) is the parent organization of which of the following organizations?

a. AICPA (American Institute of Certified Public Accountants)

b. SIFMA (Securities Industry and Financial Markets Association)

c. AAA (American Accounting Association)

d. FASB (Financial Accounting Standards Board)

2. Concerning FASB membership, which statement is not true?

a. All members are also members of the Financial Accounting Foundation.

b. All members must sever organizational ties with their previous employer.

c. All members are full time and fully paid.

d. Not all members are CPAs from public practice.


3.Question Content AreaU.S. companies that have subsidiaries in foreign countries can file their financial statements with the SEC by using

a. either IFRS or GAAP.

b. GAAP.

c. IFRS for their subsidiaries and GAAP for their holdings in the United States.d. IFRS.

4. Which of the following is not a major standard-setting body responsible for the establishment of U.S. and International Financial Reporting Standards?

a. IASB (International Accounting Standards Board)

b. SEC (Securities Exchange Commission)

c. PCAOB (Public Company Accounting Oversight Board)

d. FASB (Financial Accounting Standards Board)


5. Question Content AreaThree major organizations in the private and public sector develop U.S. and International Financial Reporting Standards. They include all of the following except the

a. EU (European Union).

b. IASB (International Accounting Standards Board).

c. SEC (Securities and Exchange Commission).

d. FASB (Financial Accounting Standards Board).


6. Question Content AreaHow many FASB members currently make up the Board?

a. 5

b. 7

c. 33

d. 21

7. Which of the following is an internal user of a company’s financial information?

a. shareholder in the company

b. union

c. bank lending to the company

d. company treasurer

8. Which of the following is not a decision that external stakeholders of a company’s financial information would make?

a. whether or not to ask for an increase in employees’ benefits during union contract negotiations

b. whether or not to extend credit to the company

c. whether or not to hold the company’s stock

d. whether or not the company should expand into foreign markets

9. Information asymmetry may cause problems because management’s behavior

a. as agents will always be in the best interests of the owners (shareholders).

b. may not always be in alignment with the outcomes preferred by the investors and creditors.

c. may be to enhance the owners’ financial interests at the expense of their self-interests.

d. will always follow classic agency law.

10. What is the correct order of presentation for the statement of cash flows?

a. Investing, Financing, Operating

b. Operating, Financing, Investing

c. Operating, Investing, Financing

d. Financing, Operating, Investing

11. What financial statement is considered the cornerstone of financial reporting?

a. the statement of cash flows

b. the statement of shareholders’ equity

c. the balance sheet

d. the income statement

12. After formulating a strategic plan, a company will engage in what three types of activities?

a. Planning, operating, and selling

b. Operating, planning, and financing

c. Investing, operating, and selling

d. Financing, investing, and operating

13. When making decisions, equity investors are interested in assessing

a. the company’s ability to pay dividends.

b. management’s ability to increase the capital providers’ investments.

c. the company’s ability to generate cash flows.

d. All of these choices are correct.

14. The four major financial statements of a corporation consist of the

a. income statement, balance sheet, statement of cash flows, and statement of changes in shareholders’ equity.

b. income statement, statement of cash flows, statement of financial flexibility, and balance sheet.

c. balance sheet, statement of cash flows, statement of retained earnings, and income statement.

d. statement of cash flows, balance sheet, income statement, and statement of capital equity.

15. The accounting equation is

a. Assets + Shareholders’ Equity = Liabilities

b. Assets = Liabilities – Shareholders’ Equity

c. Assets -Liabilities = Shareholders’ Equity

d. Assets + Liabilities = Shareholders’ Equity

16. The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is not a commonly required report?

a. Form 10-Q. An extensive quarterly report, including financial statements.

b. Form 10-K. An extensive annual report, including financial statements

c. Form 8-K. A report used to describe significant events that may affect the company.

d. Form S-2. A registration statement

17. Which of the following organizations has legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets?

a. Financial Accounting Standards Board

b. International Accounting Standards Board

c. Accounting Principles Board

d. Securities and Exchange Commission

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