14 Free Test Bank for Intermediate Accounting 2nd Edition by Lo 

Gauge your readiness for intermediate accounting and take a proper check before your exam with 14 free test bank for Intermediate Accounting 2nd Edition by Lo multiple choice questions. Thisintermediate accounting test bank free grounds your fundamentals of financial accounting theory by highlighting chapter 1 knowledge, deepening your comprehension of this chapter. Here multiple choice questions are organized by difficulties and followed by four possible answers. Each question in this test has one best answer. Kindly click on your choice for each quizlet and submit your results to see answers and have your test automatically scored. Aside from multiple choice type, this sample now comes in free text type, too. You should enjoy the two for optimal effects. Best luck on your upcoming exam!

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Which statement best explains "moral hazard"?

•  A) The term refers to a situation where one party has an information advantage over another.
•  B) The term refers to the need external parties have for financial information.
•  C) The term refers to the fact that some people have more information than others.
•  D) The term refers to a situation where one party cannot observe the actions of another party.

Which statement appropriately explains the meaning of "publicly accountable enterprise"?

•  A) Firms without equity, debt or other securities traded in public markets.
•  B) Firms with equity, debt or other securities traded in public markets.
•  C) Firms with assets and liabilities that provide goods and services in public markets.
•  D) New firms entering the public markets to provide goods and services.

Having an audit performed on the company's financial statements BEST illustrates which of the following?

•  A) Cheap talk.
•  B) Signalling.
•  C) Moral hazard.
•  D) Information.

Which statement best explains "adverse selection"?

•  A) The term refers to a situation where one party has an information advantage over another.
•  B) The term refers to the need external parties have for financial information.
•  C) The term refers to the fact that some people have more information than others.
•  D) The term refers to a situation where one party cannot observe the actions of another party.

Which of the following statements is correct about financial information?

•  A) All users require the same kind of information.
•  B) Forward looking information is useful for evaluating management stewardship.
•  C) Trade offs are necessary in accounting.
•  D) Historical cost information is useful for pricing the value of a company's shares.

Which statement best explains "information asymmetry"?

•  A) Information asymmetry means that there is uncertainty about the future.
•  B) Information asymmetry means that some people have more information than others.
•  C) Information asymmetry means that external parties need financial information.
•  D) Information asymmetry means information is material to a decision maker.

Why is the efficient securities market hypothesis important for accounting?

•  A) When providing financial information, management need only consider the specifically identifiable users who they know will rely on the information.
•  B) Accounting standards can assume that the majority of market participants have a reasonable level of sophistication.
•  C) Individuals with information that is not publicly available cannot make significant profits.
•  D) Accounting information is the only source of financial information that markets use.

Which statement best explains the semi-strong form of the efficient securities market hypothesis?

•  A) A market in which the prices of securities traded in that market at all times properly reflect all information that is publicly known about those securities.
•  B) A market in which the prices of securities traded in that market reflect all information, whether publicly or privately known.
•  C) A market in which the prices of debt securities traded in that market reflect all information that is privately known about those securities.
•  D) A market in which the prices of equity securities traded in that market reflect all information that is privately known about those securities.

Which is NOT a question that financial accounting theory can answer?

•  A) Why do companies provide financial information to external parties?
•  B) Why do all companies use the same accounting policies?
•  C) Why is certain disclosure mandatory in financial reporting?
•  D) What is the role of financial accounting and reporting?

Which statement best explains the relationship between the efficient securities market hypothesis and accounting?

•  A) Security prices adjust slowly when accounting reports are publicly released.
•  B) The timeliness of accounting information is irrelevant to securities markets.
•  C) Accounting information competes with other sources of information.
•  D) Security prices are unaffected when accounting reports are publicly released.

Management motivation to increase the likelihood that the company will receive a $50,000 government rebate BEST illustrates which of the following?

•  A) Earnings management.
•  B) Positive accounting theory.
•  C) Information asymmetry.
•  D) Efficient securities market.