Appendix E

Financial Accounting

Business
44
Questions
15
True/False
21
Choices
8
Essay
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Questions

Q1
Free

In common law countries (such as the U.S., the U.K., and Canada), greater emphasis is placed on public information than in code law countries (such as France and Germany).

True/False
expand_more
A) True.
B) False.
Answer:
True
Q2
Free

For countries whose tax standards are closely tied to financial reporting standards (Continental Europe and Japan), accounting earnings tend to be lower so companies can minimize tax payments.

True/False
expand_more
A) True.
B) False.
Answer:
True
Q3
Free

In countries where debt financing is more common (Japan) compared to equity financing, there is greater emphasis on reporting the ability of the company to earn profits for its investors rather than the ability to repay debt.

True/False
expand_more
A) True.
B) False.
Answer:
False
Q4

Some countries are more secretive (Brazil and Switzerland), leading to fewer financial disclosures.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q5

More economically developed economies (the U.S. and the U.K.) have a need for more complex accounting standards.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q6

Convergence of accounting practices is expected to increase the flow of investment across borders.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q7

The primary objective of the IASB is to develop accounting standards in the U.S.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q8

By late 2007, over 100 jurisdictions, including China, Australia, and all of the countries in the European Union (EU), either require or permit the use of IFRS.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q9

The Norwalk Agreement formalizes the commitment between the FASB and IASB to the convergence of U.S. GAAP and IFRS.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q10

The FIFO inventory method is not allowed under IFRS.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q11

IFRS allows, but does not require, revaluation of property, plant and equipment to fair value.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q12

Under U.S. GAAP, development expenditures are capitalized, while under IFRS, these expenditures must be expensed immediately.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q13

Under IFRS, inventory write-downs due to using the lower-of-cost-or-market rule are allowed to be reversed in a future year if the market value subsequently increases.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q14

When preparing a statement of cash flows, IFRS allows companies to report cash outflows from interest payments as either operating or financing cash flows, while U.S. GAAP requires these outflows to be reported as only operating activities.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q15

When preparing a statement of cash flows, IFRS allows companies to report cash inflows from interest and dividends as either operating or investing cash flows, while U.S. GAAP requires these inflows to be reported as only operating activities.

True/False
expand_more
A) True.
B) False.
Answer:

Subscribe First.

Q16

IFRS stands for:

Multiple Choice
expand_more
A) Independent Financial Reporting System
B) International Financing Reform System
C) International Financial Reporting Standards
D) International Financial Regulation of Securities
Answer:

A) You need to subscribe to get the answer.

Q17

Which of the following characteristics of a country most likely affects the extent of companies' financial disclosure practices?

Multiple Choice
expand_more
A) Inflation
B) Tax laws
C) Population
D) Culture
Answer:

A) You need to subscribe to get the answer.

Q18

Which of the following is not a reason why accounting differs across countries?

Multiple Choice
expand_more
A) Culture
B) Population
C) Tax laws
D) Sources of financing
Answer:

A) You need to subscribe to get the answer.

Q19

Countries that have different rules for financial accounting and tax accounting, rely more on equity financing, and have historical political and economic ties with Great Britain are referred to as what types of countries?

Multiple Choice
expand_more
A) Code law countries
B) European Union countries
C) Common law countries
D) Conformist countries
Answer:

A) You need to subscribe to get the answer.

Q20

Countries that have similar rules for financial accounting and tax accounting, rely more on debt financing, and have historical political and economic ties with Germany are referred to as what types of countries?

Multiple Choice
expand_more
A) Code law countries
B) European Union countries
C) Common law countries
D) Conformist countries
Answer:

A) You need to subscribe to get the answer.

Q21

When a country establishes financial reporting rules that closely resemble tax reporting rules, reported accounting profits tend to be:

Multiple Choice
expand_more
A) Negative
B) Higher
C) Lower
D) Misreported
Answer:

A) You need to subscribe to get the answer.

Q22

One motivation for reducing differences in accounting practices across countries is to:

Multiple Choice
expand_more
A) Decrease the flow of international capital
B) Allow greater competition among companies
C) Reduce companies' tax burdens
D) Make it easier for investors to compare companies from different countries
Answer:

A) You need to subscribe to get the answer.

Q23

The body primarily responsible for establishing a single set of global accounting standards is the:

Multiple Choice
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A) IASB
B) SEC
C) FASB
D) IOSCO
Answer:

A) You need to subscribe to get the answer.

Q24

The Norwalk Agreement:

Multiple Choice
expand_more
A) Allows foreign companies listed on U
B) Formalizes the commitment between the FASB and IASB to converge U
C) Eliminates the requirement that U
D) Gives authority to the IASB to set accounting standards for U
Answer:

A) You need to subscribe to get the answer.

Q25

For which of the following topics is accounting under both U.S. GAAP and IFRS essentially the same?

Multiple Choice
expand_more
A) Receivables
B) Long-term assets
C) Inventory
D) Research and development expenditures
Answer:

A) You need to subscribe to get the answer.

Q26

Which inventory cost flow assumption is allowed under U.S. GAAP but not under IFRS?

Multiple Choice
expand_more
A) Specific identification
B) FIFO
C) LIFO
D) Average cost
Answer:

A) You need to subscribe to get the answer.

Q27

Which of the following statements is true regarding revaluation of property, plant, and equipment to fair value?

Multiple Choice
expand_more
A) Only IFRS allows revaluation of property, plant, and equipment to fair value
B) Only U
C) Both U
D) Neither U
Answer:

A) You need to subscribe to get the answer.

Q28

Compared to that in the U.S, the cost to companies in other countries of documenting effective internal controls is:

Multiple Choice
expand_more
A) Much greater
B) Slightly greater
C) About the same
D) Much less
Answer:

A) You need to subscribe to get the answer.

Q29

Why are some U.S. companies opposed to elimination of the LIFO inventory method?

Multiple Choice
expand_more
A) Inventory amounts are more difficult to calculate under FIFO
B) LIFO most likely matches actual flow of inventory
C) Increased tax burden
D) Most international companies use LIFO
Answer:

A) You need to subscribe to get the answer.

Q30

Assuming rising costs, the switch from LIFO to FIFO or average cost would most likely have what effect(s)?

Multiple Choice
expand_more
A) Increase reported net income in the income statement
B) Decrease tax obligations to the Internal Revenue Service (IRS)
C) Increase reported net income and tax obligations
D) Decrease reported net income and tax obligations
Answer:

A) You need to subscribe to get the answer.

Q31

Suppose a company has research costs of $100,000 and development costs of $200,000 for the year. Under IFRS, what amount would be reported as an expense in the current year's income statement?

Multiple Choice
expand_more
A) $100,000
B) $150,000
C) $200,000
D) $300,000
Answer:

A) You need to subscribe to get the answer.

Q32

Suppose a company has research costs of $100,000 and development costs of $200,000 for the year. Under U.S. GAAP, what amount would be reported as an expense in the current year's income statement?

Multiple Choice
expand_more
A) $100,000
B) $150,000
C) $200,000
D) $300,000
Answer:

A) You need to subscribe to get the answer.

Q33

Would a company be more likely to report a contingent liability under U.S. GAAP or IFRS?

Multiple Choice
expand_more
A) U
B) IFRS
C) Equally likely
D) Contingent liabilities are not reported under IFRS
Answer:

A) You need to subscribe to get the answer.

Q34

Suppose a severe storm floods a company's headquarters, causing damages to the building of $300,000 and destruction of inventory of $200,000. Because of the unusual nature of this event, the company had no flood insurance to cover these losses. Under IFRS, how much would the company report as an extraordinary loss in the current year's income statement?

Multiple Choice
expand_more
A) $0
B) $200,000
C) $300,000
D) $500,000
Answer:

A) You need to subscribe to get the answer.

Q35

Suppose a severe storm floods a company's headquarters, causing damages to the building of $300,000 and destruction of inventory of $200,000. Because of the unusual nature of this event, the company had no flood insurance to cover these losses. Under U.S. GAAP, how much would the company report as an extraordinary loss in the current year's income statement?

Multiple Choice
expand_more
A) $0
B) $200,000
C) $300,000
D) $500,000
Answer:

A) You need to subscribe to get the answer.

Q36

Suppose a company pays interest of $10,000 for the year on borrowed amounts due in two years. Under IFRS, what is the most the company can report as cash outflows from financing activities?

Multiple Choice
expand_more
A) $10,000
B) $2,000
C) $5,000
D) $0
Answer:

A) You need to subscribe to get the answer.

Q37

How is the organization responsible for standard setting in the U.K. different from that in France? Which of these organizations is closer to the FASB in the U.S.?

Essay
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Answer:

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Q38

Describe at least five reasons why accounting practices differ across countries. Which reason do you think is most important? Explain why.

Essay
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Answer:

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Q39

Which inventory cost flow assumption is allowed under U.S. GAAP but not under IFRS? Explain why some U.S. companies will lobby strongly to keep this method as an allowable alternative.

Essay
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Answer:

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Q40

What does it mean to revalue a long-term asset? How do U.S. GAAP and IFRS differ regarding revaluation of long-term assets?

Essay
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Answer:

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Q41

How is preferred stock reported differently under U.S. GAAP and IFRS? Do you think preferred stock is a liability or an equity item? Why?

Essay
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Answer:

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Q42

Listed below are seven reasons why accounting practices differ across countries followed by a list of descriptions. Match each description with the best reason placing the letter designating the reason in the space provided. 1. Inflation The extent of public disclosure depends on the secretiveness of society. __ __ 2. Political and economic ties In some countries, asset values increase rapidly because of the general price level changes. __ __ 3. Culture Countries share business activities and have political connections. __ __ 4. Tax laws Some countries rely more heavily on debt capital than on equity capital to fund operations. __ __ 5. Legal system Common law countries rely more heavily on public information. __ __ 6. Economic development More developed economies have more complex business transactions. __ __ 7. Sources of financing Alignment between financial reporting and tax reporting rules. __ __

Essay
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Answer:

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Q43

Below are seven reasons for differences in accounting practices among countries. For each reason, at least two options are provided. For each reason, select the option that best describes the United States. Low inflationInflation

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Answer:

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Q44

Below are seven reasons for differences in accounting practices among countries. For each reason, at least two options are provided. For each reason, select the option that best describes Germany. 1. Similar tax and

Essay
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Answer:

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