1.

Which of the following address issues that arise from biases in a self-reporting accounting system?

1. Professionally established accounting standards.
2. Independent audits.

a.II only.

b.I and II.

c.Neither I nor II.

d.I only.

2.

Revenue Recognition

The four specific revenue recognition criteria emphasized by the SEC include all of the following except:

a.The seller's price to the buyer is fixed or determinable.

b.Delivery has occurred or services have been rendered.

c.Persuasive evidence of a sales arrangement must exist.

d.Collection has occurred or is reasonably certain to occur.

3.

Income Statement

In general, the income statement helps satisfy the objectives of financial reporting by providing investors, lenders and other stakeholders with important information:

1. About a company's comprehensive income.
2. To assess the amounts, timing, and uncertainty of future net cash inflows.

a.I and II

b.Neither I nor II

c.II only

d.I only

4.

What drives the demand for financial accounting information?

1. The need for information to make resource allocation decisions.
2. The need to compete for and attract scarce economic resources.

a.I only.

b.I and II.

c.II only.

d.Neither I nor II.

5.

Information that would be useful to existing and potential investors in making decisions about buying, selling, or holding equity instruments is specifically covered by which of the following?

1. Conceptual Framework
2. Objective: Useful Information for Expected Returns to Investors, Lenders, and Other Creditors
3. Accounting Standards Codification

a.I only.

b.II only.

c.III only.

d.I, II, and III.

6.

Information asymmetry arises from

a.Companies competing for a wide variety of scarce resources.

b.The separation of ownership and control of resources.

c.The differing information needs of investors and creditors.

d.All of the choices create information asymmetry.

7.

Asset

Which of the following is a characteristic of an asset?

a.The transaction or event giving the company the right to the benefit or control over the benefit must occur within the next year or operating cycle, whichever is longer.

b.The resource must contribute directly to the company's future net expenses.

c.The company must be able to obtain the future benefit and control others' access to it.

d.All of the choices are correct.

8.

Income Statement

To provide relevant and faithfully represented information about financial performance and income to investors, lenders, and other creditors, the company must:

a.Decide where to report the elements on the income statement.

b.Determine the timing of recognition of income elements.

c.Identify the elements that must be recognized in income.

d.All of the choices are correct.

9.

Balance Sheet

How does the balance sheet at the end of an accounting period relate to the other four financial statements?

a.The statement of shareholders' equity reports owners' claims on the company and how those claims changed during the period.

b.The elements of the income statement-revenues, expenses, gains and losses, and net income-are measured in terms of changes in assets and liabilities.

c.The statement of cash flows explains changes in financial position in terms of cash inflows and outflows during the period.

d.All of the choices are correct.