Exam 3: The Measurement Fundamentals of Financial Accounting

On October 1, 2018, $30,000 of annual magazine subscriptions were sold by Cat World Magazines. The subscribed magazines are delivered on the first day of each month beginning on October 1, 2018. The total cost of the subscribed magazines is $18,000, equal to $1,500 per month. What is the amount of revenue to be recognized during 2018?

Present value is defined as:

Which one of the following is violated when a department store records revenue for gift certificates sold to customers that are not expected to be redeemed until next year?

Which assumption is applied when Laramie recognizes the operations of its wholly owned subsidiary, Big Sky, separately and distinctly from its own operations?

The matching principle states that:

A business entity operates in two general markets. They are:

Objective accounting information:

Which one of the following is violated when a retail store records revenue for a bank credit card sale prior to receiving the money from the bank?

For each financial statement item listed in 1 through 5 below, identify at which financial statement valuation (listed in a through g) the item should be reported. You may use each letter more than once or not at all. Financial Statement Valuations a. Present value b. Fair market value c. Original cost d. Original cost less accumulated depreciation e. Lower of cost or market ____ 1. Inventory ____ 2. Plant and equipment (book value) ____ 3. Land used for plant site ____ 4. Current liabilities ____ 5. Long-term notes receivable

Most companies prepare annual financial statements:

Sales price is:

Explain the 'markets' in which a business entity operates.

Why are market values not used for property, plant, and equipment on the balance sheet?

Which one of the following is considered an unrealistic assumption in accounting?

The shareholders' equity section of the balance sheet is:

By recognizing the economic effects of inflation on the accounting financial statements, which accounting assumption is ignored?

Why is inflation ignored in accounting?

Match the descriptions listed in letters a through e below with the proper valuation numbered from 1 through 4. Descriptions a. Amount paid is reduced by the measured amount used up b. Amount that would have to be paid to acquire the same asset at the balance sheet date c. Discounted cash flows d. Amount derived from net equity of company e. Amount received if the asset were sold ____ 1. Present value ____ 2. Fair market value ____ 3. Replacement cost ____ 4. Residual interest

What is the most critical question in the matching process? Why is it critical?

Which one of the following statements best describes the concept of conservatism?