Exam 14: Accounting Principles and Reporting Standards

Assets are carried on the books at historical cost.

The basic financial reports of a business DO NOT provide users information about

Because financial statements must be objective and based on verifiable evidence,data obtained from estimates cannot be presented.

The income statement shown below was prepared and sent by Curtis Brown,the owner of Curt's Crafts,to several of his creditors.The business is a sole proprietorship that sells crafts and toys.An accountant for one of the creditors looked over the income statement and found that it did not conform to generally accepted accounting principles.Using the following additional information provided by the owner,prepare an income statement in accordance with generally accepted accounting principles.

The SEC's 2003 report to the Congress on "principles-based" accounting observed that the first characteristic of objectives-based standards,as dictated by the Sarbanes-Oxley Act,is that any standard must be based on

Identify the statement below that is incorrect.

Which of the following statements is not correct?

The separate economic entity assumption assumes that:

An accountant who records revenue when a credit sale is made rather than waiting for the receipt of cash from the customer is

When Tamar Snyder opened a shoe store,her accountant did not include the cash in her personal savings account as one of the assets of the business.This is an example of

Hour Place Clock Repair paid $2,400 cash in advance for a six month advertising contract with the local newspaper.According to the matching principle,if 2 months of the contract has expired by the end of the current fiscal year,how much should Hour Place Clock Repair report as Advertising Expense on the Income Statement?

Which of the following statements is correct?

Hour Place Clock Repair paid $1,800 cash in advance for a one year insurance policy.According to the matching principle,if 4 months of the policy has expired by the balance sheet date,how much should Hour Place Clock Repair report as Prepaid Insurance?

The matching principle is being applied when the cost of equipment is depreciated over its useful life.

Which of the following is allowed under generally accepted accounting principles?

The concept of realization permits a company to recognize income whenever there is an increase in the market value of the assets it holds.

The Statements of Financial Accounting Standards that automatically become generally accepted accounting principles are issued by

The ____________________ principle requires that if income is to be properly measured,all expired costs associated with the earning of revenue must be deducted from the revenue in the same accounting period.

The monetary unit assumption assumes that:

The Financial Accounting Standards Board is