Question 1

Recording land at its cost rather than its appraisal value illustrates

Accepted Answer

A)   the full disclosure principle.
B)   the cost basis principle.
C)   the realization principle.
D)   the matching principle.E) All of the above
F) B) and C)

Question 2

The Financial Accounting Standards Board is

Accepted Answer

A)   a branch of the AICPA.
B)   a branch of the IRS.
C)   an independent organization.
D)   a branch of the SEC.E) A) and B)
F) A) and C)

Question 3

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?

Accepted Answer

A)   $0
B)   $600
C)   $1,200
D)   $1,800E) B) and C)
F) A) and D)

Question 4

Investors and creditors expect to receive a cash flow from the business entity

Accepted Answer

A)   directly from the distribution of the company's earnings.
B)   indirectly through the disposition of their interests for cash.
C)   Both of the above.
D)   Neither of the above.E) B) and D)
F) A) and B)

Question 5

The four assumptions financial statement users should be able to assume that preparers of the statements have made in preparing the statements that are listed by the FASB's conceptual framework are

Accepted Answer

A)   separate economic entity, going concern, monetary unit, and periodicity of income.
B)   conservatism, matching principle, revenue recognition principle, and periodicity of income.
C)   conservatism, cost-benefit test, full disclosure principal, and industry practice constraint.
D)   historical cost basis, materiality realization, and transparency.E) B) and C)
F) All of the above

Question 6

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

Accepted Answer

A)   A company was offered $60,000 for land that it had purchased for $15,000. The company did not sell the land but increased the Land account to $60,000.
B)   An owner lists the full cost of his or her personal automobile, which is occasionally used for business purposes, on the company's balance sheet.
C)   A large company recorded the $20 cost of a tool as an expense, although the item is expected to be used for 3 years.
D)   The Equipment account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000.E) A) and B)
F) A) and C)

Question 7

An accountant generally assumes that a firm is a(n) ____________________ and will continue to operate indefinitely.

Accepted Answer

going concern

Question 8

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

Accepted Answer

A)   the cost-benefit test.
B)   an improved and consistently applied framework.
C)   qualitative characteristics.
D)   transparency.E) B) and C)
F) A) and D)

Question 9

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

Accepted Answer

A)   at the time the cash is paid.
B)   after the one year policy has expired.
C)   in equal installments over the one year policy period, as the expense is incurred.
D)   in two equal installments, six months apart.E) None of the above
F) All of the above

Question 10

Match the qualitative characteristics of accounting information with the descriptions.

Accepted Answer

The answer of Match the qualitative characteristics of accounting information...

Question 11

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.

Accepted Answer

Misstating net income on the i...

Question 12

Why is the cost principle dependent on the going concern assumption?

Accepted Answer

Unless there is evidence to the contrary...

Question 13

A firm is following generally accepted accounting principles if it reports merchandise inventory on the balance sheet at its expected selling price.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)   at the time the cash is received.
B)   after the one year subscription has expired.
C)   in equal installments over the one year subscription period, as it is earned.
D)   in two equal installments, six months apart.E) B) and D)
F) A) and B)

Question 15

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

Accepted Answer

A)   Current and potential investors and creditors in making investment and credit decisions.
B)   Company management and owners.
C)   Tax Authorities.
D)   Regulating Agencies.E) A) and B)
F) All of the above

Question 16

The ____________________ assumption permits the costs of assets purchased many years ago to be added to the costs of newly purchased assets for financial statement reporting.

Accepted Answer

stable monetary unit

Question 17

Each year there was an increase in the market value of some stock owned by the Mudstream Company, but the accountant did not record the increase in asset value and equity until the stock was sold. In this situation, the accountant

Accepted Answer

A)   followed the matching principle.
B)   followed the realization principle.
C)   violated the accrual principle.
D)   violated the matching principle.E) A) and B)
F) A) and C)

Question 18

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

Accepted Answer

A)   the IRS.
B)   the SEC.
C)   the FASB.
D)   the AICPA.E) All of the above
F) None of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Accounting information that is capable of making a difference in a decision by the user of the report is

Accepted Answer

A)   comparable.
B)   reliable.
C)   relevant.
D)   neutral.E) A) and C)
F) A) and B) C

Exam 14: Accounting Principles and Reporting Standards

Recording land at its cost rather than its appraisal value illustrates

Correct AnswerverifiedShow Answer

The Financial Accounting Standards Board is

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Investors and creditors expect to receive a cash flow from the business entity

Correct AnswerverifiedShow Answer

The four assumptions financial statement users should be able to assume that preparers of the statements have made in preparing the statements that are listed by the FASB's conceptual framework are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An accountant generally assumes that a firm is a(n) ____________________ and will continue to operate indefinitely.

Correct Answerverifiedgoing concern

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Match the qualitative characteristics of accounting information with the descriptions.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedMisstating net income on the i...View AnswerShow Answer

Why is the cost principle dependent on the going concern assumption?

Correct AnswerverifiedUnless there is evidence to the contrary...View AnswerShow Answer

A firm is following generally accepted accounting principles if it reports merchandise inventory on the balance sheet at its expected selling price.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The ____________________ assumption permits the costs of assets purchased many years ago to be added to the costs of newly purchased assets for financial statement reporting.

Correct Answerverifiedstable monetary unit

Each year there was an increase in the market value of some stock owned by the Mudstream Company, but the accountant did not record the increase in asset value and equity until the stock was sold. In this situation, the accountant

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Accounting information that is capable of making a difference in a decision by the user of the report is

Correct AnswerverifiedC

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going concern

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Misstating net income on the i...
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Unless there is evidence to the contrary...
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stable monetary unit

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