11) Information must be sufficiently transparent so that it makes sense to reasonably informed users of the financial statements, such as creditors. This qualitative characteristic of information is called:
A) verifiability.
B) faithful representative.
C) relevant.
D) understandability.
12) A company uses LIFO to determine the cost of goods sold each year. This inventory method always results in the lowest possible net income. This is an example of:
A) cost benefit constraint.
B) materiality.
C) verifiability.
D) consistency.
13) The fair value of a plant asset is equal to:
A) the amount the business could sell the asset for.
B) the amount of cash paid plus the dollar value of noncash consideration given in exchange for the plant asset at acquisition.
C) the amount of cash paid plus the loan taken out to finance the purchase of the plant asset.
D) the amount a company can receive for the asset when sold in order to go out of business.
14) In 1960, Johnson Company purchased a building for $100,000. In 2013, a real estate professional says the building has a fair value of $1,000,000. In 2013, a similar building down the street recently sold for $900,000. What value is reported for the building on the balance sheet at December 31, 2013?
A) $100,000
B) $550,000
C) $900,000
D) $1,000,000
15) Which statement is FALSE?
A) International Financial Reporting Standards are used by many countries in the world.
B) U.S. Generally Accepted Accounting Principles are used by many countries in the world.
C) The Financial Accounting Standards Board is working with the International Accounting Standards Board to develop similar accounting standards.
D) For many years, U.S. Generally Accepted Accounting Principles were considered to be the superior set of accounting standards in the world.
16) In order to compare the financial statements of Toyota Corporation to the financial statements of General Motors, it would be preferable to use _________.
A) U.S. Generally Accepted Accounting Principles for General Motors and International Financial Reporting Standards for Toyota.
B) U.S. Generally Accepted Accounting Principles for both companies.
C) International Financial Reporting Standards for both companies.
D) U.S. Generally Accepted Accounting Principles for Toyota Corporation and International Financial Reporting Standards for General Motors.
17) The International Accounting Standards Board is responsible for establishing:
A) the code of professional conduct for accountants.
B) the Securities and Exchange Commission.
C) Generally Accepted Accounting Principles used in the United States.
D) International Financial Reporting Standards.
18) Which of the following statements is FALSE?
A) The Securities and Exchange Commission is investigating whether all U.S. public companies should adopt International Financial Reporting Standards.
B) The advantage of a uniform set of global accounting standards is that financial statements from a U.S. company will be comparable to those of a foreign company.
C) In the long run, a uniform set of global accounting standards will reduce the costs of doing business globally.
D) With a uniform set of global accounting standards, companies will have to produce multiple versions of their financial statements.
19) Which of the following is a CORRECT statement about GAAP and IFRS?
A) IFRS prefers valuing assets at historical cost while GAAP prefers using fair value.
B) IFRS is more "rules-based" than GAAP.
C) The FASB and the IASB are working towards convergence of standards.
D) The SEC will require all companies to use IFRS beginning in 2013.
20) To be useful, accounting information must have the fundamental qualitative characteristics of:
A) comparability and relevance.
B) relevance and faithful representation.
C) materiality and understandability.
D) faithful representation and timeliness.