Intermediate Accounting Ch 2
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( S. O. 1) Which of the following is not a benefit associated with the FASB Conceptual Framework Project?
A. A conceptual framework should increase financial statement users' understanding of and confidence in financial reporting.
B. Practical problems should be more quickly solvable by reference to an existing conceptual framework.
C. A coherent set of accounting standards and rules should result.
D. Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.
( S. O. 4) Which of the following violates the concept of reliability?
A. The management report refers to new discoveries and inventions made, but the financial statements never report the results.
B. Financial statements included goodwill with a carrying amount estimated by management.
C. Financial statements were issued one year late.
D. An interim report is not issued even though it would provide feedback on past performance.
( S. O. 4) Which of the following is a characteristic describing the primary quality of relevance?
B. Predictive value.
( S. O. 4) Under Statement of Financial Accounting Concepts No. 2, representational faithfulness is an ingredient of Relevance Reliability
A. Yes Yes
B. Yes No
C. No No
D. No Yes
( S. O. 4) If accounting information is verifiable, representationally faithful, and neutral, it can be considered:
( S. O. 4) The major objective of the consistency principle is to:
A. provide timely financial information for statement users.
B. promote comparability between financial statements of different accounting periods.
C. match the appropriate revenues and expenses in a given accounting period.
D. be sure the same information is disclosed in each accounting period.
( S. O. 5) Comprehensive income as characterized in SFAC No. 6 includes all changes in equity during a period except:
A. sale of assets other than inventory. B. those resulting from investments by or distribution to owners.
C. sales to a particular entity where ultimate payment by the entity is doubtful.
D. those resulting from revenue generated by a totally owned subsidiary.
( S. O. 5) According to the FASB conceptual framework, earnings
A. are the same as comprehensive income.
B. exclude certain gains and losses that are included in comprehensive income.
C. include certain gains and losses that are excluded from comprehensive income.
D. include certain losses that are excluded from comprehensive income.
( S. O. 5) According to the FASB Conceptual Framework, the elements. assets, liabilities, and equity. describe amounts of resources and claims to resources at/ during a Moment in Time Period of Time
A. Yes No
B. Yes Yes
C. No Yes
D. No No
( S. O. 6) The economic entity assumption in accounting is best reflected by which of the following statements?
A. When a parent and subsidiary company are merged for accounting and reporting purposes the economic entity assumption is violated.
B. The best way to truly measure the results of enterprise activity is to measure them at the time the enterprise is liquidated.
C. The activity of a business enterprise can be kept separate and distinct from its owners and any other business unit.
D. A business enterprise is in business to enhance the economic well being of its owners.
( S. O. 6) Continuation of an accounting entity in the absence of evidence to the contrary is an example of the basic concept of Consistency Going Concern
A. No No
B. Yes No
C. No Yes
D. Yes Yes
( S. O. 6) In accounting an economic entity may be defined as:
A. a business enterprise.
B. an individual.
C. a division within a business enterprise.
D. all of the above.
( S. O. 6) Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy?
A. Monetary unit assumption.
B. Periodicity assumption.
C. Going- concern assumption.
D. Economic entity assumption.
( S. O. 6) During the lifetime of an entity accountants produce financial statements at artificial points in time in accordance with the concept of: Objectivity Periodicity
A. No No
B. Yes No
C. No Yes
D. Yes Yes
( S. O. 7) Although many objections have been raised about the " historical cost" principle, it is still widely supported for financial reporting because it
A. is an objectively determinable amount.
B. is a good measure of current value.
C. facilitates comparisons between years.
D. takes into account price- level adjusted information.
( S. O. 7) Under the revenue recognition principle, revenue is generally recognized when ( 1) realized or realizable and ( 2):
A. when earned.
B. the merchandise has been ordered. C. all expenses have been identified. D. the accounting process is virtually complete.
( S. O. 7) Which of the following is an incorrect statement regarding the matching principle?
A. Expenses are recognized when they make a contribution to revenue.
B. Costs are never charged to the current period as an expense simply because no connection with revenue can be determined.
C. In recognizing expenses, accountants attempt to follow the approach of let the expense follow the revenue.
D. If no direct connection appears between costs and revenues, but the costs benefit future years, an allocation of cost on some systematic and rational basis might be appropriate.
( S. O. 7) The concept referred to by the " matching" principle is
A. that current liabilities have the same period of existence as the current assets.
B. that all cash disbursements for a period be matched to cash receipts for the period.
C. that net income should be reported on a quarterly basis.
D. that where possible the expenses to be included in the income statement were incurred to produce the revenues.
( S. O. 7) In complying with the full disclosure principle, an accountant must determine the amount of disclosure necessary. How much disclosure is enough?
A. Information sufficient for a person without any knowledge of accounting to understand the statements.
B. All information that might be of interest to an owner of a business enterprise.
C. Information that is of sufficient importance to influence the judgment and decisions of an informed user.
D. Information sufficient to permit most persons coming in contact with the statements to reach an accurate decision about the financial condition of the enterprise.
( S. O. 8) What is the underlying concept that supports the immediate recognition of a loss?
B. Matching. C. Consistency.
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