1. An item that is either unusual or infrequent (not both) is classified as a non-operating item in the "Other Gains/Losses" section of the income statement. As this may be a nonrecurring item, it is possible that this may diminish the FASBs criterion of _______, presented in Statement of Financial Accounting Concept 8.
A. timeliness
B. predictive ability
C. verifiability
D. neutrality

2. To improve evaluating ROA when doing interfirm comparability, financial analysts have suggested eliminating ______________________.
A. interest expense after
B. capital leases
C. income tax expense
D. stock option compensation

3. The rational investor is assumed to be risk averse. Therefore, the riskier investment is expected to generate higher returns.

The___________ is an attempt to deal with both risks and returns.
A. CAPM
B. EMH
C. HIP
D. YCP

4. Which of the following is not a basic concept of income?
A. psychic income
B. real income
C. money income
D. gross income

5. The common stock issued by a corporation is measured by that corporation at its
A. current value
B. fair value
C. historical cost (value)
D. intrinsic value

6. One of the primary differences between IFRS and U.S. GAAP is that U.S. GAAP are considered
A. principle based standards.
B. required to be accepted by the accounting profession.
C. rules based standards
D. developed by the governments of the countries belonging to the IASB.

7. After the SEC was established, the first accounting organization to develop accounting standards was the
A. CAP
B. APB
C. FASB
D. AICPA

8. To be classified as a long-term liability,
A. the obligation must be due within the coming year
B. it must only be a financing activity
C. it will not require the use of current assets within the current year
D. may not be classified as a contingent liability

9. You are attempting to research if earnings management is actually occurring in large, publically traded corporations. This type of research is
A. normative accounting research
B. positive accounting research
C. critical perspective research
D. human information processing research

10. Which of the following items would not be reported as part of other comprehensive income?
A. excess of the additional pension liability over the unrecognized prior service cost
B. unrealized holding gains on available-for-sale securities
C. foreign currency translation adjustments
D. unrealized holding losses on trading securities

11. Companies which have a simple capital structure are required to report
A. diluted earnings per share
B. basic earnings per share
C. both basic and diluted earnings per share
D. only diluted earnings per share if they have potentially dilutive securities.

12. Besides culture, various environmental factors can influence the development of accounting standards in a country. Which of the following is typically not considered an environmental factor which can influence the development of accounting standards?
A. political system
B. legal system
C. climate
D. economic development

13. When the FASB needs a quick resolution to an accounting issue they may
A. have the EITF address the issue
B. request the SEC to address the issue
C. issue a new accounting standard
D. ask for guidance from the FAF

14.According to agency theory, the expenditures incurred by the agent are referred to as
A. monitoring costs
B. relevant costs
C. conflict costs
D. bonding costs

15. One of the major criticisms that came from the committee members of SATTA was that
A. most of the accounting research from 1922 to 1962 was deductive in nature
B. most of the accounting research during the period 1922 to 1962 used the neoclassical economic theory of the firm
C. Both A and B above
D. Neither A or B above

16. The international accounting committee prior to the IASB was known as the
A. IFRS Foundation
B. IASC
C. SAC
D. IOSCO

17. A discontinued operation is a component of an entity that is an operating segment
A. which is classified as held for sale
B. whose sale is considered both unusual and infrequent
C. whose sale must be reported on the income statement after any extraordinary items
D.which the company may sell

18. Under the fair value hierarchy (SFAS No, 157), a publically traded stocks held as an investment would be classified as
A. Level 1
B. Level 2
C. Level 3
D. Level 4

19. Some of the major changes in accounting due to the Enron failure include
A. changing the way the FASB is funded
B. the passage of the Sarbanes-Oxley Act (SOX) in 2002
C. the demise of the public accounting firm Arthur Andersen
D. All of the above, A, B, and C are correct

20. Under SFAS 157, the definition of fair value is based on
A. a subjective measurement
B. the recommended amount by the auditing firm
C. the entrance price
D. the exist price

Problem II

Below are 7 questions. Choose any 2of the 7 questions and answer them on the following pages. If you choose more than 2, I will only grade the first 2. You will notice for some questions there is no real correct (or incorrect) answer. Therefore it is important that you write concisely, defending your answer.

At the top of each page be sure to write the question number that you are answering. Present your answers to the questions in numeric order on the pages (e.g., 1, 3, not 3, 1). Do not write more than one page for each question that you answer. If you feel like you answered the question in less than one page that is acceptable - you are not required to write a full-page - that is your decision. If you use outside materials or quotesbe sure to show them as a reference on page8, along with the question number preceding the reference. You will be graded on (1) how you answerthe question and (2) your writing style. Be sure to read pages6 and 7 of the syllabus regarding writing style and format.For these questions you should single-space.

Questions

1.The mission of the FASB is given on page 11 of the text. Discuss how the FASB has (or has not) accomplished its mission.

2. What are the major changes between Statement of Financial Accounting Concept 2 and Statement of Financial Accounting Concept 8, which superseded Statement of Financial Accounting Concepts1 and 2? The SFACs are on Blackboard under Course Content.

3. On July 13, 2012 the SEC issued their Final Staff Report in which they stated they are not yet ready to decide on whether or not the U.S. should convert to IFRS. Discuss the pros and cons of the U.S. adopting IFRS and doing away with current U.S. GAAP. The SEC Final Staff Report on IFRS is on Blackboard under Course Content.

4. Of the different research methodologies discussed in Chapter 4, which one do you believe has the most applicability to accounting practice? Discuss why.

5.The measurement of reported net income can always be questioned. For that reason we consider the quality of earnings and try to determine if earnings management has taken place. The text discusses five illegitimate earnings management techniques (ps. 156 - 157). How can "improper" earnings management techniques impact the quality of earnings?

6. Discuss the current operating performance concept of income and the all-inclusive concept of income. Is comprehensive income consistent with either of the two? Discuss why or why not.

7. The use of fair value measurements has always been a controversial area in financial accounting. Discuss SFAS No. 157 and how it has impacted financial accounting reporting.