Example Test Questions

1 Financial Accounting Theory and Analysis Text and Cases 11 th Edition Test Bank By Richard G. Schroeder Myrtle W. Clark Jack M. Cathey For 1 / 4

2 Example Test Questions Chapter 1

Multiple Choice:

1.Which of the following bodies has the ultimate authority to issue accounting pronouncements in the United States?a.Securities and Exchange Commission b.Financial Accounting Standards Board c.International Accounting Standards Committee d.Internal Revenue Service Answer a 2.What historical evidence of the business operations of the private estate of Apollonius was discovered early inthe20th century?a.The Iliad b.Plato's Republic c.The Zenon papyri d.Pacioli’s work, Summa de Arithmetica Geometria Proportioni et Proportionalita, Answer c 3.Who has been given credit or developing the double-entry system of bookkeeping?a.Francis Wheat b.Fra Luca Pacioli c.A. C. Littleton d.William Paton Answer b 4.Which of the following was not a criticism of the development of accounting standards by the Accounting Principles Board?a.The independence of the members of the APB. The individuals serving on the board had full- time responsibilities elsewhere that might influence their views of certain issues.b.The structure of the board. The largest eight public accounting firms (at that time) were automatically awarded one member, and there were usually five or six other public accountants on the APB.c.Harmonization. The accounting standards developed were dissimilar to those developed by the International Accounting Standards Committee.d.Response time. The emerging accounting problems were not being investigated and solved quickly enough by the part-time members.Answer c 5.Which of the following is the professional organization of university accounting professors?a.American Accounting Association b.American Institute of Certified Public Accountants 2 / 4

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• American Institute of Accountants
• Financial Executives Institute

Answer a

• What controversy originally highlighted the need for standard setting groups to have more

authority?

• Accounting for stock options
• Accounting for derivatives
• Accounting for marketable securities
• Accounting for the investment tax credit

Answer d

• Which of the following committees recommended abolishing the Accounting Principles Board

and replacing it with the Financial Accounting Board?

• Wheat
• Cohen
• Trueblood
• Anderson

Answer a

• Which of the following is a public sector accounting standard setter?
• FASB
• SEC
• APB
• CAP

Answer b

• Which of the following types of pronouncements now establishes generally accepted accounting

principles?

• Statements of Concepts
• Statements of Financial Accounting Standards
• APB Opinions
• Accounting Standards Updates

Answer d

• Which of the following types of pronouncements are intended to establish the objectives and

concepts that the FASB will use in developing standards of financial accounting and reporting?

• Statements of Concepts
• Statements of Financial Accounting Standards
• APB Opinions
• Accounting Standards Updates

Answer a

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• Which of the following is not a consequence of the standards overload problem to small

businesses?

• If a small business omits a GAAP requirement from audited financial statements, a qualified

or adverse opinion may be rendered.

• Small businesses do not need to keep financial records
• The cost of complying with GAAP requirements may cause a small business to forgo the

development of other, more relevant information.

• Small CPA firms that audit smaller companies must keep up to date on all the same

requirements as large international firms, but they cannot afford the specialists that are available on a centralized basis in the large firms.

Answer b

• Some accountants maintain that accounting standards are as much a product of political action as

they are of careful logic or empirical findings. This belief is an example of the concept of

• Standard setting as apolitical process
• Standards overload
• Economic consequences
• The role of ethics in accounting

Answer a

• The impact of accounting reports on various segments of our economic society is the definition of

the concept of

• Standard setting as apolitical process
• Standards overload
• Economic consequences
• The role of ethics in accounting

Answer c

• Considering and understanding how business decisions affect the financial statements is
• The sole responsibility of the Securities and Exchange Commission.
• Provided in the auditor’s report.
• Referred to as an economic consequence perspective.
• Interpreted strictly by the company’s suppliers.

Answer c

15. Economic consequences of accounting standard-setting means:

• Standard-setters must give first priority to ensuring that companies do not suffer any adverse

effect as a result of a new standard.

• Standard-setters must ensure that no new costs are incurred when a new standard is issued.
• The objective of financial reporting should be politically motivated to ensure acceptance by

the general public.

• Accounting standards can have detrimental impacts on the wealth levels of the providers of

financial information.

Answer d

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