Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Define the two aspects of the monetary unit assumption.

Accepted Answer

1. Expressing financial facts

Question 3

The concepts of objectivity and verifiability eliminate subjective decisions.

Accepted Answer

A) True 
 B)False

Question 4

If an important fact that would have an effect on an investor's decisions is omitted from the financial statements, the ____________________ principle has been violated.

Accepted Answer

The answer of If an important fact that would have...

Question 5

Define and give an example of all modifying constraints on accounting principles.

Accepted Answer

A. Materiality; Materiality refers to th

Question 6

For convenience, accountants assume that the value of money is stable or that changes in its value are not great enough to affect the recorded financial data.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is NOT true?

Accepted Answer

A)  The American Institute of CPA's has in the past had strong influence on the development of accounting principles. 
B)  The Sarbanes-Oxley Act places great emphasis on internal controls and fraud prevention. 
C)  The SEC has authority to accept or reject financial accounting principles and standards developed by the FASB. 
D)  Because of the Sarbanes-Oxley Act, it is probable that the FASB's conceptual framework will become less important in developing accounting principles and standards. 
A)  The American Institute of CPA's has in the past had strong influence on the development of accounting principles. 
B)  The Sarbanes-Oxley Act places great emphasis on internal controls and fraud prevention. 
C)  The SEC has authority to accept or reject financial accounting principles and standards developed by the FASB. 
D)  Because of the Sarbanes-Oxley Act, it is probable that the FASB's conceptual framework will become less important in developing accounting principles and standards.

Question 8

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

Accepted Answer

A)  Accounting and auditing guides. 
B)  Statements of position. 
C)  Practice bulletins. 
D)  Tax authority guidelines. 
A)  Accounting and auditing guides. 
B)  Statements of position. 
C)  Practice bulletins. 
D)  Tax authority guidelines.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If an expenditure that is expected to benefit future periods is made during one accounting period, the cost should be divided and charged as an expense during each period benefited.

Accepted Answer

A) True 
 B)False

Question 11

Financial accounting rules affect the recording of data used to prepare financial reports that go to ____________________ and creditors.

Accepted Answer

The answer of Financial accounting rules affect the recording of...

Question 12

Lack of ____________________ would result in financial reports that are not comparable with earlier statements.

Accepted Answer

The answer of Lack of ____________________ would result in financial...

Question 13

Indicate in each case whether the item has been handled in accordance with generally accepted accounting principles (GAAP). If so, indicate the key basic concept that has been followed. If not, indicate which concept has been violated and tell how the item should have been recorded or presented.
1. White Farm Equipment Company manufactures tractors and combines. It pays its salespeople a commission of 15 percent of the sales price as their compensation. During the current year, the company's sales were $100,000,000 and commissions amounted to $15,000,000. In the income statement, sales are shown as $100,000,000, but the $15,000,000 in commissions was not recorded in the current year as it will not be paid until the next year.
2. Plato Plastics Molding uses a large quantity of small tools in its manufacturing process. The annual purchases of the tools, which have a life of about two years, are approximately 1 percent of the company's net income for the year. The company has followed the practice of capitalizing the cost of the tools and depreciating the cost over two years. The owner asks why the accountant spends so much time on "bookkeeping" and tells her to simply charge the tools to expense when they are purchased. The accountant agrees.
3. Lauren Fox owns a snow removal business in Maine. Customers who will be vacationing in Florida for the winter must make a deposit of one-half of the seasonal rate on September 1, the last date to make arrangements to have their sidewalks and driveways plowed throughout the winter while they are gone. The balance is due on November 1. At the time deposits are received, Fox records them as revenue. Refunds, if any, are treated as expenses at the time they are made.
4. The Dollar Store sells such items as discontinued products and merchandise purchased from bankrupt companies. Freight costs on goods purchased are quite high. The company adds the freight costs to the purchase price and treats the total as cost of its merchandise inventory.
5. Each year, Neuman Enterprises has a large number of uncollectible accounts. Neuman charges uncollectible accounts to expense when they are deemed to be uncollectible. On the average, an account is deemed to be uncollectible about 18 months after the due date of the account.

Accepted Answer

1. No; revenue recognition principle and

Question 14

Paige Turner Publishing's employees worked the last 3 days of December 2013, that they will not be paid for until January 2014. According to the matching principle, Paige Turner Publishing should recognize the wages expense for the last 3 days of 2013

Accepted Answer

A)  in 2013 when the employees worked. 
B)  in 2014 when they were paid. 
C)  half in 2013 and half in 2014. 
D)  in whichever year the management wants to. 
A)  in 2013 when the employees worked. 
B)  in 2014 when they were paid. 
C)  half in 2013 and half in 2014. 
D)  in whichever year the management wants to.

Question 15

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.

Accepted Answer

The answer of The ____________________ principle requires that if income...

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The ____________________ assumption, which assumes that a firm will continue to operate indefinitely, permits carrying forward a portion of the cost of assets that will be used in future periods.

Accepted Answer

The answer of The ____________________ assumption, which assumes that a...

Question 18

A deviation from generally accepted accounting principles is

Accepted Answer

A)  permissible if the amount involved is material. 
B)  permissible if the amount involved is immaterial. 
C)  never allowed. 
D)  permissible only if it's required in order to conform to the monetary unit assumption. 
A)  permissible if the amount involved is material. 
B)  permissible if the amount involved is immaterial. 
C)  never allowed. 
D)  permissible only if it's required in order to conform to the monetary unit assumption.

Question 19

Which of the following statements is correct?

Accepted Answer

A)  Under the accrual basis of accounting, revenue is recorded in the period in which it is earned. 
B)  Under the accrual basis of accounting, expenses are recorded in the period in which they are incurred. 
C)  Both of the above statements are correct. 
D)  Neither of the above statements is correct. 
A)  Under the accrual basis of accounting, revenue is recorded in the period in which it is earned. 
B)  Under the accrual basis of accounting, expenses are recorded in the period in which they are incurred. 
C)  Both of the above statements are correct. 
D)  Neither of the above statements is correct.

Question 20

The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of the

Accepted Answer

A)  realization principle. 
B)  matching principle. 
C)  conservatism principle. 
D)  consistency principle. 
A)  realization principle. 
B)  matching principle. 
C)  conservatism principle. 
D)  consistency principle.

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

Define the two aspects of the monetary unit assumption.

The concepts of objectivity and verifiability eliminate subjective decisions.

If an important fact that would have an effect on an investor's decisions is omitted from the financial statements, the ____________________ principle has been violated.

Define and give an example of all modifying constraints on accounting principles.

For convenience, accountants assume that the value of money is stable or that changes in its value are not great enough to affect the recorded financial data.

Which of the following statements is NOT true?

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

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

If an expenditure that is expected to benefit future periods is made during one accounting period, the cost should be divided and charged as an expense during each period benefited.

Financial accounting rules affect the recording of data used to prepare financial reports that go to ____________________ and creditors.

Lack of ____________________ would result in financial reports that are not comparable with earlier statements.

Paige Turner Publishing's employees worked the last 3 days of December 2013, that they will not be paid for until January 2014. According to the matching principle, Paige Turner Publishing should recognize the wages expense for the last 3 days of 2013

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.

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

The ____________________ assumption, which assumes that a firm will continue to operate indefinitely, permits carrying forward a portion of the cost of assets that will be used in future periods.

A deviation from generally accepted accounting principles is

Which of the following statements is correct?

The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of the

Accounting: the Language of Business

Analyzing Business Transactions

Analyzing Business Transactions Using T Accounts

The General Journal and the General Ledger

Adjustments and the Worksheet

Closing Entries and the Postclosing Trial Balance

Accounting for Sales and Accounts Receivable

Accounting for Purchases and Accounts Payable

Cash Receipts, Cash Payments, and Banking Procedures

Payroll Computations, Records, and Payment

Payroll Taxes, Deposits, and Reports

Accruals, Deferrals, and the Worksheet

Financial Statements and Closing Procedures

Accounts Receivable and Uncollectible Accounts

Filters

Exam 14: Accounting Principles and Reporting Standards

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

Define the two aspects of the monetary unit assumption.

The concepts of objectivity and verifiability eliminate subjective decisions.

If an important fact that would have an effect on an investor's decisions is omitted from the financial statements, the ____________________ principle has been violated.

Define and give an example of all modifying constraints on accounting principles.

For convenience, accountants assume that the value of money is stable or that changes in its value are not great enough to affect the recorded financial data.

Which of the following statements is NOT true?

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

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

If an expenditure that is expected to benefit future periods is made during one accounting period, the cost should be divided and charged as an expense during each period benefited.

Financial accounting rules affect the recording of data used to prepare financial reports that go to ____________________ and creditors.

Lack of ____________________ would result in financial reports that are not comparable with earlier statements.

Paige Turner Publishing's employees worked the last 3 days of December 2013, that they will not be paid for until January 2014. According to the matching principle, Paige Turner Publishing should recognize the wages expense for the last 3 days of 2013

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.

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

The ____________________ assumption, which assumes that a firm will continue to operate indefinitely, permits carrying forward a portion of the cost of assets that will be used in future periods.

A deviation from generally accepted accounting principles is

Which of the following statements is correct?

The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of the

Accounting: the Language of Business

Analyzing Business Transactions

Analyzing Business Transactions Using T Accounts

The General Journal and the General Ledger

Adjustments and the Worksheet

Closing Entries and the Postclosing Trial Balance

Accounting for Sales and Accounts Receivable

Accounting for Purchases and Accounts Payable

Cash Receipts, Cash Payments, and Banking Procedures

Payroll Computations, Records, and Payment

Payroll Taxes, Deposits, and Reports

Accruals, Deferrals, and the Worksheet

Financial Statements and Closing Procedures

Accounts Receivable and Uncollectible Accounts

Filters