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 (and 2).

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 tax

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 SEC.

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. The SFAC which proposed that a statement of cash flows should replace the statement of changes in financial position is

A. SFAC 1

B. SFAC 2

C. SFAC 5

D. SFAC 6

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. request the EITF to 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. Neither A, B, or C above

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 the FASB-IASB proposed format of the statement of financial position, cash would be reported as a(n)

A. current asset

B. operating asset

C. investing asset

D. financing asset

Questions (each answer should be less than one page)

1. 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.

2. 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.

3. 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.