Intermediate Accounting Volume 1, 13th Canadian Edition by Donald E. Kieso Test bank
Answer: c
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
CPA: Strategy & Governance
Bloomcode: Knowledge
AACSB: Analytic
15. Objectives of financial reporting does NOT include
a) providing information that is useful to users in making resource allocation decisions.
b) providing information about the liquidation value of an enterprise.
c) providing information about an entity’s economic resources, obligations, and equity/net assets.
d) providing information about changes in an entity’s economic resources, obligations, and equity/net assets.
Answer: b
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
16. As part of the objective of general-purpose financial reporting, which of the following perspectives is considered appropriate?
a) proprietary perspective
b) entity perspective
c) stakeholder perspective
d) None of the above perspectives are considered appropriate.
Answer: b
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
17. Which of the following is NOT true regarding accrual-basis accounting?
a) A company records events that change its financial statements in the periods in which the events occur.
b) Revenues and expenses are recognized in the periods in which the company receives or pays cash.
c) It has greater potential to depict meaningful trends in revenues and expenses.
d) Revenues and expenses can be more easily related to the economic environment of the period in which they occurred.
Answer: b
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
18. The preparation by some companies of biased information is sometimes referred to as
a) conservative financial reporting.
b) full disclosure of all material facts.
c) aggressive financial reporting.
d) stewardship.
Answer: c
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
19. Where information asymmetry exists, the capital market may attract the wrong kind of market participants. This is known as
a) moral hazard.
b) conservative accounting.
c) adverse selection.
d) an inefficient marketplace.
Answer: c
Difficulty: Easy
Learning Objective: Understand the financial reporting environment. .
Section Reference: Financial Statements and Financial Reporting
CPA: Financial Reporting
CPA: Professional & Ethical Behaviour
Bloomcode: Knowledge
AACSB: Analytic
20. The “efficient markets hypothesis” proposes that
a) market prices reflect information known only to internal stakeholders.
b) market prices reflect all information about a company.
c) market prices reflect information known only to external stakeholders.
d) information asymmetry is required.
Answer: b
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Finance
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic
21. Which of the following does NOT describe a cause of management bias?
a) the company’s need to comply with contracts, such as debt covenants
b) management’s desire to meet financial analysts’ expectations
c) the tendency of management to downplay negative events
d) the desire for all stakeholders to have access to all information
Answer: d
Difficulty: Easy
Learning Objective: Understand the financial reporting environment.
Section Reference: Financial Statements and Financial Reporting
CPA: Audit & Assurance
CPA: Financial Reporting
Bloomcode: Knowledge
AACSB: Analytic