Exam 14: Accounting Principles and Reporting Standards

The income statement shown below was prepared and sent by Jenna Preston,the owner of Preston Gifts,to several of her creditors.The business is a sole proprietorship that sells miscellaneous gifts.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.

Carlos Verde owns a small nursery.He recently approached the local bank for a loan to finance an expansion of his nursery.Carlos prepared the balance sheet given below and submitted it with his loan application.The balance sheet does not conform to generally accepted accounting principles.Using the additional information provided by the owner,prepare a corrected balance sheet in accordance with generally accepted accounting principles.

In order to ensure that they are meaningful and useful,financial statements should be prepared

The matching principle requires that all known costs be charged to the current period of operations.

What is meant by the concept of neutrality in accounting?

If too much of the cost of an asset is charged as depreciation expense in the present period,the firm's net income will be understated in later periods.

Paige Turner Publishing's employees worked the last 3 days of December 2016,that they will not be paid for until January 2017.According to the matching principle,Paige Turner Publishing should recognize the wages expense for the last 3 days of 2016

The SEC has authority to define accounting terms and to prescribe accounting procedures used by all ____________________ held corporations.

In its conceptual framework,the FASB concluded that financial reporting rules should concentrate on providing information that is helpful to

Recording land at its cost rather than its appraisal value illustrates

Most businesses follow the general rule that revenue is recognized when cash is received.

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 end of the current fiscal year,how much should Hour Place Clock Repair report as Insurance Expense on the Income Statement?

Which of the following important types of documents are not issued by the Accounting Standards Executive Committee

Paige Turner Publishing paid cash in advance for a one year insurance policy.According to the matching principle,Paige Turner Publishing should recognize the policy as insurance expense

Because of the modifying constraint of ____________________,assets are understated rather than overstated if any uncertainty exists.

The materiality constraint refers to:

Keeping the personal assets of the owner of a business separate from the assets of the firm is an example of

In recent years,it has been reported that several large companies have manipulated business transactions and accounting records to change the net income reported on their income statements.Suggest five concepts,assumptions,principles,or conventions that such manipulation would violate.

Revenue should not be recorded until it is ____________________;that is,until new assets are created in the form of money or claims against others.

Paige Turner Publishing receives cash from its subscribers in advance for a one year subscription.Under the revenue recognition principle,Paige Turner Publishing should recognize the revenue from the subscriptions