Question Details

1. In 2003, FASB and IASB met and established four criteria for establishing revenue recognition. To recognize revenue, which of the following conditions must be present?
A change in assets has occurred and can be appropriately measured.
Payment for the sale must be received prior to recognizing the revenue.
The product or deliverable, in the case of a service business, has been received by the customer.
A promise to deliver has been established.
2. Failure to provide any care in fulfilling a duty owed to another is called
gross negligence
constructive fraud
breach of contract
negligence
3. Which of the following is a fundamental characteristic of the market system?
Unselfish behavior
Central planning by government
Government-set wages and prices
Property rights
4. The income effect indicates that
consumers should substitute among various products until the marginal utility from the last unit of each product purchased is the same
a rise in money income will cause consumers to buy smaller quantities of normal goods
when the price of a product falls, a consumer will be able to buy more of it with a specific income
when the price of a product falls, the lower price will induce the consumer to buy more of that product now that it is relatively cheaper
5. The price elasticity of demand coefficient measures
the slope of the demand curve
how far business executives can stretch their fixed costs
buyer responsiveness to price changes
the extent to which a demand curve shifts as incomes change
 6. A normative statement is one that
applies only to microeconomics
is based on the law of averages
is based on value judgments
applies to macroeconomics
7. Many conflicts of interest in business contracts can be remedied ethically by which of the following?
Deception and disclosure
Camouflage and consent
Disclosure and consent
Conflicts of interest can never be remedied ethically
8. Four professional general standards and responsibilities for Certified Public Accountants are quality control and assurance, professional judgment, competence, and:
integrity
diligence
independence
knowledge
9. In 2002, Adelphia Cable filed bankruptcy when it was discovered that
excess fictitious expenses of $1 million were added to the income statement
bank debt in excess of $2.3 billion was not shown on the financial statements
assets on the financial statements were considerably undervalued
sales in excess of $72 billion were omitted from the financial statements
10. When budgets are used to measure performance, there is a danger that budgetary slack may occur. This happens when
sales budgets are set too high and cost budgets are set too low
sales budgets are set too low and cost budgets are set too high
sales budgets are set too low and cost budgets are set too low
sales budgets are set too high and cost budgets are set too high
11. ABC Company owes XYZ Enterprises $1 million for goods purchased from XYZ over a year ago. XYZ Enterprises continues to list the $1 million in their accounts receivable balance and does not record any allowance for doubtful accounts. XYZ Enterprises is failing to follow
SFAS 169
Financial Accounting Standards Board FAS 157
Financial Accounting Standards Board Statement No. 5
SFAS 101
12) The EU Privacy Directive presents problems for the United States in that
data may not be transferred to a non-EU entity unless guarantees are provided that equal security measures are in place
transferred data may not be translated into another language
high transfer charges are required to be paid by the recipient in the currency of the country transferring the data
several layers of approval are necessary before any data may be transferred to a non-EU entity
13) When revenue is recognized and shipment has not been made and the criteria for recognizing revenue on bill-and-hold transactions set out in SEC Staff Accounting Bulletin No. 101 have not been met, this is known as
timely revenue recognition
postrevenue recognition
premature revenue recognition
conservative revenue recognition
14. According to the Agency Theory, in a corporation there are two types of information consumers known as
principals and vendors
customers and agents
vendors and customers
agents and principals
15. Tom Donaldson and Tom Dunfee are proponents of ethical guidelines related to technology that are based on differentiating hypernorms from nonhypernorms. This theory is known as
Integrative Social Contracts Theory
Transparent Ethical Dilemma Theory
Electronic Communications Privacy Theory
Social Contract Network Theory
16. When the economist says that economic wants are insatiable, this means that
economic resources—land, labor, capital, and entrepreneurial ability—are scarce
these wants are virtually unlimited and therefore incapable of complete satisfaction
the structure of consumer demand varies from time to time and from country to country
economic resources are valuable only because they can be used to produce consumer goods
17. The pursuit of self-interest
is highly detrimental to the market system
means the same as selfishness
gives direction to the market system
is reflected in the behavior of firms, but not in the behavior of consumers
18) The bankruptcy of WorldCom in 2002 was due to the company- actions in
expensing equipment purchases rather than capitalizing these purchases
failing to record revenues
classifying expenses as assets
recording fictitious liabilities
19) Productive efficiency refers to
the production of the product-mix most wanted by society
production at some point inside of the production possibilities curve
the full employment of all available resources
the use of the least-cost method of production
20. Agency costs arise when agents fail to act in the best interests of the principals. One example of losses from poor decisions would be
purchasing inferior material to earn yearly bonus
investing additional funds in profitable projects
prioritizing projects, according to the best interests of the corporation
increasing the scope of the audit of the financial statements
21) If the price of normal good X rises, the income
effect will induce the consumer to buy more of X and the substitution effect will induce him to buy less
and substitution effects will both induce the consumer to buy more of X
effect will induce the consumer to buy less of X and the substitution will induce him to buy more
and substitution effects will both induce the consumer to buy less of X
 22) Section 55 of the Principles of Professional Conduct of the AICPA states that
members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism
a member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities
a member should observe the profession- technical and ethical standards, strive continually to improve competence and quality of services, and discharge professional responsibility to the best of the member- ability
members should perform all professional responsibilities with the highest sense of integrity
23) The concept of economic efficiency is primarily concerned with
the limited wants-unlimited resources dilemma
the conservation of irreplaceable natural resources
considerations of equity in the distribution of wealth
obtaining the maximum output from available resources
24. Which of the following is a normative statement?
The temperature is high today.
It is too hot to play tennis today.
It will cool off later this evening.
The humidity is high today.
25. Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then, the price elasticity of demand is
4.00
3.94
2.09
1.37
26) Other things equal, an excise tax on a product will
increase its supply
increase the quantity sold
increase its demand
increase its price
 27) If a conflict of interest arises prior to entering into a business contract, the parties should
cease and desist because all conflicts of interest are irreconcilable
determine the type of conflict and if disclosure of the conflict of interest is sufficient to proceed with the contract
commence a cooling-off period until the conflict is removed
stop negotiations immediately and contact a mediator to negotiate the terms of the contract
 28) Assuming an economy has fixed quantities of resources, that economy  
is able to produce the same amount of output regardless of the production technologies it chooses
is able to satisfy all consumer wants
is more efficient, the larger the amount of goods and services it produces
will produce the same output whether or not resources are used efficiently
29) When evaluating the performance of managers in investment centers, performance metrics should be based on
only costs under their control
revenues, costs, and investments under their control
only investments under their control
revenue and costs under their control
30. When applying for a bank loan or trade credit, one way a company can appear to be in a healthier financial position would be to
overstate its expenses
understate its sales
undervalue its assets
understate its liabilities