Exam 3: The Measurement Fundamentals of Financial Accounting

The matching principle states that:

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

The valuation basis used to measure accounts receivable is:

On December 1, 2010, Karr Company purchased inventory for $55,000. On December 31, 2010, the replacement cost of that inventory is $57,000. At what amount would inventory be measured on the December 31, 2010 balance sheet?

Which of the following are exceptions to financial accounting measurement?

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

On May 1, 2009, $9,000 of annual magazine subscriptions were sold by Glolar, Inc. The subscribed magazines are delivered on the first day of each month beginning on May 1, 2009. The total cost of the subscribed magazines is $3,600 or $300 per month. A. Determine the amount of revenue during 2009. B. Explain how the matching concept is applied relative to the magazines.

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

When is present value be used on the financial statements? Give an example in your explanation.

When preparing the financial statements, we assume that the life of the entity will continue beyond the current period. Which assumption are we most likely following?

For each financial statement item listed in 1 through 5 below, identify the financial statement valuation (listed in a through h) at which it should be reported. You may use each letter more than once or not at all. ____ 1. Cash ____ 2. Short-term investments ____ 3. Accounts receivable ____ 4. Long-term liabilities ____ 5. Office building

Today's fair market value would be the same as:

Present value, as of today, would be the same as:

On October 1, 2010, $20,000 of annual magazine subscriptions were sold by Boating Monthly. The subscribed magazines are delivered on the first day of each month beginning on October 1, 2010. The total cost of the subscribed magazines is $6,000 or $500 per monthly delivery. Using the four criteria necessary for revenue recognition, present an argument for not recognizing $10,000 of revenue during 2010.

Recognition of increases in purchasing power of monetary units is inconsistent with the:

Technically, the valuation basis used to measure shareholders' equity is:

The shareholders' equity section of the balance sheet is:

Everett, Inc.'s reporting period ends on June 30th every year. This is an example of:

Three years ago, Astro Masters, Inc. purchased the three assets listed in the following table. The chief financial officer, Bill Moss, is presently trying to decide what to do with each asset. He has three options for each asset: (1) sell it; (2) keep it; and (3) sell it and replace it with an equivalent asset. The following information is provided to aid his decision. Based on your calculations, what would be the total cash flows associated with selling and replacing Asset C with an equivalent asset? a. $2,500 b. $5,500 c. $5,000 d. $4,500

Accounts receivable have a face value of $10,000 and estimated net realizable value of $8,000 on December 31, 2010. At what amount would the accounts receivable be measured on the December 31, 2010 balance sheet?