ACC 563 Week 4 Quiz – Strayer University NEW

ACC/563 Week 4 Quiz – Strayer NEW

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Week 4 Quiz 3: Chapters 4 and 5

Chapter 4
Multiple Choice

1. Which of the following research approaches emphasizes going from the specific to the general?
a. Deductive
b. Behavioral
c. Inductive
d. Pragmatic

Answer

2. Which of the following research approaches is based on the concept of utility or usefulness?
a. Deductive
b. Behavioral
c. Inductive
d. Pragmatic

Answer

3. Which of the following research approaches is attributed to DR Scott?
a. Deductive
b. Ethical
c. Inductive
d. Pragmatic

Answer

4. Which of the following outcomes of providing accounting information is an attempt to identify individual securities that are mispriced by reviewing all available financial information?
a. Agency theory
b. Efficient markets
c. Fundamental analysis
d. Capital asset pricing model

Answer

5. Which of the following outcomes of providing accounting information is an attempt to deal with both risks and returns?

a. Agency theory
b. Efficient markets
c. Fundamental analysis
d. Capital asset pricing model

Answer

6. Which of the following outcomes of providing accounting information is based on the supply and demand model
a. Agency theory
b. Efficient markets
c. Fundamental analysis
d. Capital asset pricing model

Answer

7. The efficient market hypothesis holds that that financial markets price assets at their intrinsic worth, given all available information. Which of the following forms of the efficient market hypothesis defines all available information as knowledge of past security prices?
a. Weak
b. Semi-weak
c. Semi-strong
d. Strong

Answer

8. The efficient market hypothesis holds that that financial markets price assets at their intrinsic worth, given all available information. Which of the following forms of the efficient market hypothesis defines all available information as all publicly available information including past stock prices?
a. Weak
b. Semi-weak
c. Semi-strong
d. Strong

Answer

9. The efficient market hypothesis holds that that financial markets price assets at their intrinsic worth, given all available information. Which of the following forms of the efficient market hypothesis defines all available information as information, including security price trends, publicly available information, and insider information?
a. Weak
b. Semi-weak
c. Semi-strong
d. Strong

Answer

10. What theory on the outcomes of providing accounting information attempts to answer the question: What is an individual’s expected benefit from a particular course of action?
a. Agency theory
b. Efficient markets
c. Fundamental analysis
d. Capital asset pricing model

Answer

11. Which of the following is not viewed as a cost to the principal in an agency relationship?
a. Monitoring expenditures by the principal
b. Monitoring expenditures by the agent
c. Bonding expenditures by the agent
d. The residual loss

Answer

12. What theory on the outcomes of providing accounting information attempts to assess an individual’s ability to use information?
a. Agency theory
b. Efficient markets
c. Human information processing
d. Capital asset pricing model

Answer

13. Which of the following is not a conclusion that has been drawn from human information processing research?
a. An individual’s perception of information is quite selective. That is, since individuals are capable of comprehending only a small part of their environment, their anticipation of what they expect to perceive about a particular situation will determine to a large extent what they do perceive.
b. Since individuals make decisions on the basis of a small part of the total information available, they do not have the capacity to make optimal decisions
c. Individuals are able to process and integrate large amounts of information simultaneously
d. Since individuals are incapable of integrating a great deal of information, they process information in a sequential fashion.

Answer

14. What theory on the outcomes of providing accounting information rejects the view that knowledge of accounting is grounded in objective principles
a. Agency theory
b. Critical perspective
c. Fundamental analysis
d. Capital asset pricing model

Answer

Essay

1. Briefly describe the following research approaches:

2. What is fundamental analysis and what is its goal?

3. Describe the efficient market hypothesis and its three forms.

4. Discuss the capital asset pricing model including the concepts of unsystematic risk, systematic risk and beta.

5. Discuss the difference between normative and positive accounting theory.

6. What is the basic assumption of agency theory? Why is the relationship between shareholders and management an agency relationship?

7. What is the goal of human information processing studies? What are the genera findings of these studies and what is the implication for accounting?

8. Discuss the concept of critical perspectives research in accounting.

9. Discuss the relationship among research, education, and practice in accounting.

Example Test Questions

Chapter 5

Multiple Choice

1. One concept of income suggests that income be measured by determining the net change over time in the discounted present value of net cash flow expected to be received by the firm. Under this concept of income, which of the following, ignoring income taxes would not affect the amount of income for a period?
a. Providing services to outsiders and investments of the funds received
b. Production of goods or services not yet sold not yet delivered to customers or clients.
c. Windfall gains and losses due to external causes.
d. The method used to depreciate property, plant and equipment.

Answer

2. The term revenue recognition conventionally refers to
a. The process of identifying transactions to be recorded as revenue in an accounting period.
b. The process of measuring and relating revenue and expenses of an enterprise for an accounting period.
c. The earning process that gives rise to revenue realization.
d. The process of identifying those transactions that result in an inflow of assets from customers.

Answer

3. In the transactions approach to income determination, income is measured by subtracting the expenses resulting from specific transactions during the period from revenues of the period also resulting from transactions. Under a strict transactions approach to income measurement, which of the following would not be considered a transaction?
a. Sale of goods on account at 20 percent markup
b. Exchange of inventory at a regular selling price for equipment
c. Adjustment of inventory in lower of cost or market inventory valuations when market is below cost.
d. Payment of salaries

Answer

4. Conventionally accountants measure income
a. By applying a value added concept
b. By using a transactions approach
c. As a change in the value of owners’ equity
d. As a change in the purchasing power of owners’ equity

Answer

5. Arid Lands, Inc., is engaged in extensive exploration for water in the Caprock Desert. If upon discovery of water the corporation does not recognize any revenue from water sales until the sales exceed the costs of exploration, the basis of revenue recognition being employed is the
a. Production basis
b. Cash (or collection) basis
c. Sales (or accrual) basis
d. Sunk cost (or cost recovery) basis

Answer

6. The installment method of recognizing revenue is not acceptable for financial reporting if
a. The collectability of the sales price is reasonably assured
b. The installment period is less than 12 months
c. The method is applied to only a portion of the total
d. Collection expenses can be reasonably predicted

Answer

7. The principal disadvantage of using the percentage of completion method of recognizing revenue from long-term contracts is that it
a. Is unacceptable for income tax purposes
b. May require that intraperiod tax allocation procedures be used
c. Gives results bases upon estimates that may be subject to considerable uncertainty
d. Is likely to assign a small amount of revenue to a period during which much revenue was actually earned

Answer

8. One of the basic features of financing accounting is the
a. Direct measurement of economic resources and obligations and changes in them in terms of money and sociological and psychological impact
b. Direct measurement of economic resources and obligations and changes in them in terms of money
c. Direct measurement of economic resources and obligations and changes in them in terms of money and sociological impact
d. Direct measurement of economic resources and obligations and changes in them in terms of money and psychological impact

Answer

9. Uncertainty and risks inherent in business situations should be adequately considered in financial reporting. This statement is an example of the concept of
a. Conservatism
b. Completeness
c. Neutrality
d. Representational faithfulness

Answer

10. Determining periodic earnings and financial position depends on measuring economic resources and obligations and changes in them as these changes occur. This explanation pertains to
a. Disclosure
b. Accrual accounting
c. Materiality
d. The matching concept

Answer

11. Under what condition is it proper to recognize revenues prior to the sale of the merchandise?
a. When the ultimate sale of the goods is at an assured sales price
b. When the revenue is to be reported as an installment sale
c. When the concept of internal consistency (of amounts of revenue) must be complied with
d. When management has a long-established policy to do so

Answer

12. Which of the following is not a concept of income identified by Bedford?
a. Psychic
b. Real
c. Investment
d. Money

Answer

13. The definition of the economic concept ofincomeis usually attributed towhich of the following economists?
a. J. R. Hicks
b. Paul Samuelson
c. Ben Bernanke
d. Adam Smith

Answer

14. Which of the following is not an approach to determining current value?
a. Replacement cost
b. Thrift value
c. Selling price
d. Discounting present value

Answer

15. Each asset—inventory, plant, equipment, and so on—would be valued based on the selling price that would be realized if the firm chose to dispose of it is the definition of which of the following current value concepts?
a. Replacement cost
b. Entry price
c. Exit value
d. Discounted present value

Answer

16. The cost to replace assets with similar assets in a similar condition is the definition of which of the following current value concepts?
a. Replacement cost
b. Selling price
c. Exit value
d. Discounted present value

Answer

17. Income is equal to the difference between the present value of the net assets at the end of the period and their present value at the beginning of the period, excluding the effects of investments by owners and distributions to owners is the definition of which of the following current value concepts?
a. Replacement cost
b. Selling price
c. Exit value
d. Discounted present value

Answer

18. Which of the following is not a criteria outlined in SEC Staff Accounting Bulletin No. 101 for the recognition of revenue?
a. Persuasive evidence of an arrangement exists.
b. Delivery has not occurred.
c. The vendor’s fee is fixed or determinable.
d. Collectability is probable.

Answer

19. Which of the following accounting theorists called of conservatism the most influential principle of valuation in accounting?
a. Henry Sweeney
b. Robert Sprouse
c. Robert Sterling
d. Edgar Edwards

Answer

20. The one-time overstatement of restructuring charges to reduce assets, which reduces future expenses, is the definition of which of the following earnings management techniques?
a. Taking a bath
b. Creative acquisition accounting
c. Creasing “cookie jar” reserves
d. Abusing the materiality concept

Answer
21. Deliberately recording errors or ignoring mistakes in the financial statements under the assumption that their impact is not significant, is the definition of which of the following earnings management techniques?
a. Taking a bath
b. Creative acquisition accounting
c. Creasing “cookie jar” reserves
d. Abusing the materiality concept

Answer
22. Overstating sales returns or warranty costs in good times and using these overstatements in bad times to reduce similar charges, is the definition of which of the following earnings management techniques?
a. Taking a bath
b. Creative acquisition accounting
c. Creasing “cookie jar” reserves
d. Abusing the materiality concept

Answer
Essay

1. List and three reasons why income reporting is important to our economic society.

2. Discuss the differences between the economic and accounting concepts of income.

3. Discuss the three basic concepts of income as defined by Bedford.

4. Discuss the difference between financial capital maintenance and physical capital maintenance.

5. Define the following terms:

a. Entry price

b. Exit price

c. Discounted present value

6. Discuss the four types of income defined by Edwards and Bell.

7. What conditions must be satisfied in order to recognize revenue according to Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements?

8. Discuss how revenue might be recognized at various points in a company’s production – sale cycle.

9. Discuss the matching concept.

10. Define the following terms:
a. Holding gains

b. Materiality

c. Conservatism

11. Discuss the concepts of earnings quality and earnings management including: