Rakap Accounting Test 1

1. What is the official language of the IASB?

English

French

Spanish

German

Doupnik - Chapter 03 #38
Learning Objective: 6
Level: Easy

Explanation

Doupnik - Chapter 03 #38
Learning Objective: 6
Level: Easy

2. Which of the following inventory valuation methods commonly used in the U.S. is NOT allowed under IAS 2 (Inventories)?

LIFO

FIFO

Weighted Average

Retail inventory method

Doupnik - Chapter 04 #4
Learning Objective: 1
Level: Medium

Explanation

Doupnik - Chapter 04 #4
Learning Objective: 1
Level: Medium

3. Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called:

Transfer pricing

Hedging

Translating

Cross-listing

Doupnik - Chapter 01 #8
Learning Objective: 2
Level: Easy

Explanation

Doupnik - Chapter 01 #8
Learning Objective: 2
Level: Easy

4. OECD is an important supranational entity. What do the letters OECD stand for?

Organization of Electrical Companies Directorate

Oil Exporting Countries and Developers

Organization for Economic Cooperation and Development

Oil Exporting Corporations and Divisions

Doupnik - Chapter 01 #22
Learning Objective: 6
Level: Medium

Explanation

Doupnik - Chapter 01 #22
Learning Objective: 6
Level: Medium

5. According to the IASB, what is needed for international accounting standards to work effectively?

Commitment from auditors to resist client pressures.

Professional judgment in the public interest on the part of management.

Financial statement preparers must produce reports that faithfully represent all transactions.

All of the above are conditions for effective standards.

Doupnik - Chapter 03 #28
Learning Objective: 4
Level: Medium

Explanation

Doupnik - Chapter 03 #28
Learning Objective: 4
Level: Medium

6. What types of issues cause differences between International Financial Reporting Standards and U.S. GAAP?

Measurement

Alternatives available

Disclosure

All of the above may be different between IFRS and U.S. GAAP

Doupnik - Chapter 04 #2
Learning Objective: 2
Learning Objective: 4
Level: Medium

Explanation

Doupnik - Chapter 04 #2
Learning Objective: 2
Learning Objective: 4
Level: Medium

7. ABCO Corporation has a parts division in country A. Its assembly division is in country B, which has a higher tax rate than country A. To minimize the corporation's overall income tax, how should ABCO set its transfer prices between its parts and assembly divisions?

The parts division should sell parts to the assembly division at low prices.

The parts division should sell parts to the assembly division at high prices.

It doesn't matter what transfer price is used because the divisions are part of the same company.

Transfer pricing has nothing to do with the total tax paid by the corporation.

Doupnik - Chapter 01 #16
Learning Objective: 3
Level: Hard

Explanation

Doupnik - Chapter 01 #16
Learning Objective: 3
Level: Hard

8. Where is the headquarters of the International Accounting Standards Board?

Washington, DC (United States)

Brussels (Belgium)

London (United Kingdom)

New York (United States)

Ottawa (Canada)

Doupnik - Chapter 03 #24
Learning Objective: 4
Level: Medium

Explanation

Doupnik - Chapter 03 #24
Learning Objective: 4
Level: Medium

9. Which of the following items should be included in the cost of property, plant, and equipment under IAS 16?

All costs directly attributable to getting the asset to the proper location

Import duties and taxes

Estimated costs of removing the asset

All of the above should be considered part of the cost of the asset.

Doupnik - Chapter 04 #14
Learning Objective: 1
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 04 #14
Learning Objective: 1
Learning Objective: 2
Level: Medium

10. The term "provision" as it is used in IAS 37, is most closely related to what term in U.S. GAAP?

Contingent liability, where the outflow of resources is "remote."

Contingent liability, where the outflow of resources is "probable."

Current liability, where the outflow is difficult to measure.

Reserve for bad debt, where the amount recoverable is "uncertain"

Doupnik - Chapter 04 #43
Learning Objective: 3
Learning Objective: 4
Level: Medium

Explanation

Doupnik - Chapter 04 #43
Learning Objective: 3
Learning Objective: 4
Level: Medium

11. Which of the following is an example of a greenfield investment?

Nike contracts with a footwear company in China to make athletic shoes

A Chinese oil company buys a U.S. oil company.

, a Japanese automaker, builds an assembly plant in Ohio

Daimler, a German automaker, merges with Chrysler, a U.S. automaker

Doupnik - Chapter 01 #12
Learning Objective: 3
Level: Medium

Explanation

Doupnik - Chapter 01 #12
Learning Objective: 3
Level: Medium

12. What is the primary role of the Financial Reporting Council in the United Kingdom?

Compliance oversight

Setting standards for accounting practice

Policy over the accounting standard setting process

All of the above

Doupnik - Chapter 05 #69
Learning Objective: 3
Level: Hard

Explanation

Doupnik - Chapter 05 #69
Learning Objective: 3
Level: Hard

13. It has been said that the addition of 10 new members to the European Union in 2004 is likely to significantly change the dynamics within the EU. What was the explanation given for this statement?

The EU is getting too large to manage effectively.

The members added in 2004 have very different economic traditions than the 15 members that joined before 2004.

The members added in 2004 have more economic power than the members that joined the EU between 1957 and 1995.

The purchasing power of the EU was weakened by the addition of additional members.

Doupnik - Chapter 03 #9
Learning Objective: 3
Level: Medium

Explanation

Doupnik - Chapter 03 #9
Learning Objective: 3
Level: Medium

14. What is the Euro-zone?

This is another term for the European Union.

The countries of the European Union that use the Euro as its currency

This is Europe's sphere of political and economic influence.

The Euro-zone refers to the original 15 members of the European Union

Doupnik - Chapter 01 #24
Learning Objective: 6
Level: Medium

Explanation

Doupnik - Chapter 01 #24
Learning Objective: 6
Level: Medium

15. Which of the following is the purpose of China's "Accounting System for Business Enterprises" issued in 2001 to supercede its "Basic Standard of Accounting for Business Enterprises?"

Increased harmonization of accounting standards

Improve comparability of accounting statements

Make financial reporting distinct from taxation

All of the above

Doupnik - Chapter 05 #18
Learning Objective: 5
Level: Medium

Explanation

Doupnik - Chapter 05 #18
Learning Objective: 5
Level: Medium

16. Which of the following statements is believed to be true about accounting harmonization by proponents of harmonization?

Harmonization would decrease feelings of nationalism.

Harmonization is desirable because there is little difference among capital markets in different countries.

Harmonization would help to raise the quality of accounting practice internationally.

None of the above statements is true.

Doupnik - Chapter 03 #6
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 03 #6
Learning Objective: 2
Level: Medium

17. . Which of the following is true about foreign direct investment? .

According to the United Nations, it is increasing on several dimensions

Since the 1980's foreign direct investment has been relatively stable worldwide

Only very large corporations are undertaking foreign direct investment

Foreign direct investment refers only to the amount of money U.S. corporations put into non-U.S. businesses.

Doupnik - Chapter 01 #28
Learning Objective: 6
Level: Medium

Explanation

Doupnik - Chapter 01 #28
Learning Objective: 6
Level: Medium

18. What was the difference between the CICPA and CACPA in the People's Republic of China (PRC)?

These are two translations of a single Chinese professional association from Mandarin to English.

The CICPA was the professional association for accountants and the CACPA is the professional association for auditors.

None of the statements above is true.

Doupnik - Chapter 05 #9
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 05 #9
Learning Objective: 2
Level: Medium

19. De jure harmonization refers to:

The process of making accounting practice consistent across countries.

The process of making accounting regulations consistent internationally.

Forcing accounting differences to be resolved through jury trials.

Eliminating the need to have different accounting methods.

Doupnik - Chapter 03 #3
Learning Objective: 1
Level: Medium

Explanation

Doupnik - Chapter 03 #3
Learning Objective: 1
Level: Medium

20. The People's Republic of China made economic reforms in the 1980s to encourage international trade. What impact have these reforms made on accounting?

Increased the demand for accounting information from investors.

Increased the supply of publicly available accounting information from Chinese companies.

Changed the nature of auditing in the PRC.

All of the above are true.

Doupnik - Chapter 05 #11
Learning Objective: 1
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 05 #11
Learning Objective: 1
Learning Objective: 2
Level: Medium

21. What is the entry point for most companies into the world of international business?

Shanghai

Exporting

Foreign direct investment

Cross-listing on international stock exchanges

Doupnik - Chapter 01 #38
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 01 #38
Learning Objective: 2
Level: Medium

22. Foreign currency exchange risk arises when:

Business transactions are denominated in foreign currencies.

Sales are made to customers in a foreign country.

Goods or services are purchased from suppliers in a foreign country

Accounting reports are prepared in a foreign currency

Doupnik - Chapter 01 #6
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 01 #6
Learning Objective: 2
Level: Medium

23. Until recently, regulation of accounting practice in the United Kingdom had traditionally been left to:

Parliament.

The accounting profession.

The securities exchange commission.

None of the above.

Doupnik - Chapter 05 #67
Learning Objective: 3
Level: Medium

Explanation

Doupnik - Chapter 05 #67
Learning Objective: 3
Level: Medium

24. Who was the first chairman of the International Accounting Standards Board?

Sir Walter Raleigh

Sir David Tweedie

Sir Paul McCartney

Sir Bryan Carsberg

Doupnik - Chapter 03 #21
Learning Objective: 4
Level: Medium

Explanation

Doupnik - Chapter 03 #21
Learning Objective: 4
Level: Medium

25. What body regulates trading of corporate securities in the People's Republic of China?

National People's Congress

State Council

Securities and Exchange Commission

Chinese Security Regulatory Commission

Doupnik - Chapter 05 #6
Learning Objective: 3
Level: Easy

Explanation

Doupnik - Chapter 05 #6
Learning Objective: 3
Level: Easy

26. What reason is given for the stagnation of accounting development during the "Cultural Revolution" in China (1966-1976)?

Over-simplification of accounting was pursued to make it accessible to a broad populace.

There was very little business being transacted in China during the Cultural Revolution.

Businesses in China were converting to international accounting standards during this period of time so they stopped developing new standards.

Auditors took over the development of accounting practice.

Doupnik - Chapter 05 #10
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 05 #10
Learning Objective: 2
Level: Medium

27. According to IAS 16, a decrease in the carrying amount of a fixed asset that is identified on an asset's first revaluation should be recorded as:

Expense on the Income Statement.

Prior period adjustment to Retained Earnings.

Credit to Revaluation Surplus.

Debit to Revaluation Surplus.

Doupnik - Chapter 04 #18
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 04 #18
Learning Objective: 2
Level: Medium

28. Accounting and financial reporting in Japan is regulated by its Commercial Code, which is patterned after the commercial code of what country?

United States

United Kingdom

Germany

France

Doupnik - Chapter 05 #42
Learning Objective: 3
Level: Medium

Explanation

Doupnik - Chapter 05 #42
Learning Objective: 3
Level: Medium

29. Under what circumstance should a German company prepare its financial statements under German GAAP rather than international financial reporting standards?

Reporting to banks

Reporting consolidated financial statements

Calculating tax

German GAAP should always be used instead of IRFS.

Doupnik - Chapter 05 #32
Learning Objective: 5
Level: Medium

Explanation

Doupnik - Chapter 05 #32
Learning Objective: 5
Level: Medium

30. Which of the following is NOT part of the due process followed by the IASB in formulating International Financial Reporting Standards?

A period of public comment is provided after discussion papers are prepared.

Standards are approved by a unanimous vote of the 14 member board.

Exposure drafts are published prior to taking a vote of the board.

National accounting standards and practices are studied before preparing exposure drafts.

Doupnik - Chapter 03 #25
Learning Objective: 4
Level: Medium

Explanation

Doupnik - Chapter 03 #25
Learning Objective: 4
Level: Medium

31. The following information was taken from the fixed asset records of Bosco Ltd as of December 31, 2006:

Carrying value                                                $100,000
Selling price                                                   $ 85,000
Cost of disposal                                             $ 3,000
Expected future cash flows                             $ 75,000
Present value of expected future cash flows      $ 63,000

Using IAS 36, what is the amount of Impairment Loss?

$37,000

$18,000

$22,000

$0

Doupnik - Chapter 04 #31
Learning Objective: 1
Learning Objective: 2
Learning Objective: 5
Level: Medium

Explanation

Doupnik - Chapter 04 #31
Learning Objective: 1
Learning Objective: 2
Learning Objective: 5
Level: Medium

32. The following inventory information was taken from the records of Kleinfeld Inc.:

Historical cost $12,000 Replacement cost $ 7,000 Expected selling price $ 9,000 Expected selling cost $ 500 Normal profit margin 10% of price Assume that subsequent to your adjustment the expected selling price increases to $13,000. (All the rest of the facts are the same.) What adjustment to inventory should be made under IAS 2 after this event?

Inventory should be increased (debited) by $3,500.

Inventory should be increased (debited) by $4,000.

No adjustment should be made to inventory once it is written down.

Inventory should be increased (debited) by $1,000.

Doupnik - Chapter 04 #8
Learning Objective: 1
Level: Medium

Explanation

Doupnik - Chapter 04 #8
Learning Objective: 1
Level: Medium

33. Mexican corporations may issue three types of stock. Series A stock can only be owned by Mexican nationals. These shares must constitute at least what percentage of corporate voting rights?

51%

49%

25%

10%

Doupnik - Chapter 05 #51
Learning Objective: 1
Level: Medium

Explanation

Doupnik - Chapter 05 #51
Learning Objective: 1
Level: Medium

34. Which region of the world has been least receptive to adopting the IASB standards?

Europe

Africa

The Americas

Asia-Pacific

Doupnik - Chapter 03 #34
Learning Objective: 6
Level: Medium

Explanation

Doupnik - Chapter 03 #34
Learning Objective: 6
Level: Medium

35. What percent of the 100 largest multinational companies are located in the United States, Japan, or the European Union?

29%

62%

75%

89%

Doupnik - Chapter 01 #23
Learning Objective: 6
Level: Medium

Explanation

Doupnik - Chapter 01 #23
Learning Objective: 6
Level: Medium

36. Under IAS 37, how are contingent liabilities treated in the financial statements?

IAS 37 does not address contingent liabilities.

They are recorded as current liabilities if the amount is reasonably measured.

They are not disclosed.

Doupnik - Chapter 04 #44
Learning Objective: 3
Level: Medium

Explanation

Doupnik - Chapter 04 #44
Learning Objective: 3
Level: Medium

37. How does IAS 38 (Intangible Assets) differ from U.S. GAAP with respect to development costs?

U.S. GAAP does not allow capitalization of development costs, whereas IAS 38 allows capitalization of these costs.

U.S. GAAP requires capitalization of development costs, whereas IAS 38 makes capitalization of these costs optional.

U.S. GAAP treats development costs as part of "Goodwill" whereas IAS 38 treats these costs as an intangible asset.

U.S. GAAP requires expensing of all development costs and IAS 38 requires capitalizing all development costs.

Doupnik - Chapter 04 #25
Learning Objective: 1
Learning Objective: 2
Level: Hard

Explanation

Doupnik - Chapter 04 #25
Learning Objective: 1
Learning Objective: 2
Level: Hard

38. Which of the following is NOT an objective of the International Accounting Standards Board?

To establish worldwide uniformity of accounting practice.

To develop a single set of enforceable global accounting standards.

To promote the use and application of global accounting standards.

To encourage convergence of national accounting standards and international accounting standards.

Doupnik - Chapter 03 #17
Learning Objective: 4
Level: Medium

Explanation

Doupnik - Chapter 03 #17
Learning Objective: 4
Level: Medium

39. Which body has the primary responsibility for establishing accounting standards in Japan?

Japanese Institute of Certified Public Accountants (JICPA)

Japanese Accounting Association (JAA)

Japan's Ministry of Finance (MoF)

International Accounting Standards Board (IASB)

Doupnik - Chapter 05 #39
Learning Objective: 3
Level: Easy

Explanation

Doupnik - Chapter 05 #39
Learning Objective: 3
Level: Easy

40. Which of the following is NOT considered GAAP in Mexico?

MIPA Bulletins

MIPA Interpretations

International Financial Reporting Standards

NBSC Statements on Accounting Practice

Doupnik - Chapter 05 #57
Learning Objective: 3
Level: Medium

Explanation

Doupnik - Chapter 05 #57
Learning Objective: 3
Level: Medium

41. When a patent or trademark is acquired in a business combination, what does IAS 38 say about recording these intangibles?

The cost of the intangibles should be expensed by the acquiring company on the merger date.

They should be recorded as separate intangible assets only if their useful life is indefinite.

They should be recorded as separate intangible assets if their fair value can be reliably measured.

Doupnik - Chapter 04 #22
Learning Objective: 1
Learning Objective: 2
Level: Medium

Explanation

Doupnik - Chapter 04 #22
Learning Objective: 1
Learning Objective: 2
Level: Medium

42. In 2003 the country with the largest amount of exports was:

United States

China

Japan

Germany

Doupnik - Chapter 01 #18
Learning Objective: 6
Level: Medium

Explanation

Doupnik - Chapter 01 #18
Learning Objective: 6
Level: Medium

43. What is the foundation for the "Basic Standard of Accounting for Business Enterprises" issued by the Chinese Ministry of Finance in 1992?

Accounting principles used by the Soviet Union

Conformity with the IASB pronouncements

Anglo-American accounting principles

Japanese code law

Doupnik - Chapter 05 #14
Learning Objective: 4
Level: Medium

Explanation

Doupnik - Chapter 05 #14
Learning Objective: 4
Level: Medium

44. What position on accounting standards harmonization has been taken by the People's Republic of China?

It plans to fully adopt IFRS as soon as feasible.

Hong Kong GAAP will dominate standard setting in the People's Republic of China.

Regulators in the PRC believe that accounting harmonization is not important for the Chinese economy.

The PRC will have its own GAAP based on the IFRS.

Doupnik - Chapter 05 #15
Learning Objective: 3
Learning Objective: 4
Level: Hard

Explanation

Doupnik - Chapter 05 #15
Learning Objective: 3
Learning Objective: 4
Level: Hard

45. What links the components of a Japanese keiretsu?

A governmental agency

A common industry affiliation

A common market

A bank

Doupnik - Chapter 05 #35
Learning Objective: 1
Level: Medium

Explanation

Doupnik - Chapter 05 #35
Learning Objective: 1
Level: Medium

Rakap Accounting Test 1

1. What is the official language of the IASB?

2.

What first name or nickname would you like us to use?

2. Which of the following inventory valuation methods commonly used in the U.S. is NOT allowed under IAS 2 (Inventories)?

3. Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called:

4. OECD is an important supranational entity. What do the letters OECD stand for?

5. According to the IASB, what is needed for international accounting standards to work effectively?

6. What types of issues cause differences between International Financial Reporting Standards and U.S. GAAP?

7. ABCO Corporation has a parts division in country A. Its assembly division is in country B, which has a higher tax rate than country A. To minimize the corporation's overall income tax, how should ABCO set its transfer prices between its parts and assembly divisions?

8. Where is the headquarters of the International Accounting Standards Board?

9. Which of the following items should be included in the cost of property, plant, and equipment under IAS 16?

10. The term "provision" as it is used in IAS 37, is most closely related to what term in U.S. GAAP?

11. Which of the following is an example of a greenfield investment?

12. What is the primary role of the Financial Reporting Council in the United Kingdom?

13. It has been said that the addition of 10 new members to the European Union in 2004 is likely to significantly change the dynamics within the EU. What was the explanation given for this statement?

14. What is the Euro-zone?

15. Which of the following is the purpose of China's "Accounting System for Business Enterprises" issued in 2001 to supercede its "Basic Standard of Accounting for Business Enterprises?"

16. Which of the following statements is believed to be true about accounting harmonization by proponents of harmonization?

17. . Which of the following is true about foreign direct investment? .

18. What was the difference between the CICPA and CACPA in the People's Republic of China (PRC)?

19. De jure harmonization refers to:

20. The People's Republic of China made economic reforms in the 1980s to encourage international trade. What impact have these reforms made on accounting?

21. What is the entry point for most companies into the world of international business?

22. Foreign currency exchange risk arises when:

23. Until recently, regulation of accounting practice in the United Kingdom had traditionally been left to:

24. Who was the first chairman of the International Accounting Standards Board?

25. What body regulates trading of corporate securities in the People's Republic of China?

26. What reason is given for the stagnation of accounting development during the "Cultural Revolution" in China (1966-1976)?

27. According to IAS 16, a decrease in the carrying amount of a fixed asset that is identified on an asset's first revaluation should be recorded as:

28. Accounting and financial reporting in Japan is regulated by its Commercial Code, which is patterned after the commercial code of what country?

29. Under what circumstance should a German company prepare its financial statements under German GAAP rather than international financial reporting standards?

30. Which of the following is NOT part of the due process followed by the IASB in formulating International Financial Reporting Standards?

33. Mexican corporations may issue three types of stock. Series A stock can only be owned by Mexican nationals. These shares must constitute at least what percentage of corporate voting rights?

34. Which region of the world has been least receptive to adopting the IASB standards?

35. What percent of the 100 largest multinational companies are located in the United States, Japan, or the European Union?

36. Under IAS 37, how are contingent liabilities treated in the financial statements?

37. How does IAS 38 (Intangible Assets) differ from U.S. GAAP with respect to development costs?

38. Which of the following is NOT an objective of the International Accounting Standards Board?

39. Which body has the primary responsibility for establishing accounting standards in Japan?

40. Which of the following is NOT considered GAAP in Mexico?

41. When a patent or trademark is acquired in a business combination, what does IAS 38 say about recording these intangibles?

42. In 2003 the country with the largest amount of exports was:

43. What is the foundation for the "Basic Standard of Accounting for Business Enterprises" issued by the Chinese Ministry of Finance in 1992?

44. What position on accounting standards harmonization has been taken by the People's Republic of China?

45. What links the components of a Japanese keiretsu?