89.
Award: 10.00 points
Management has recently purchased new equipment but is uncertain about its useful life. For the initial year, management estimated a useful life of 10
years. However, due to a major accident during the first year, management is now uncertain about the equipment’s functionality and has revised its
estimate to 5 years and included a description of their uncertainty and of this change in estimated useful life in financial statement disclosures. Which of
the following is an accurate statement regarding this approach?
Information contains error because the useful life of the equipment is uncertain.
Information is free from error because management made the correct decision in revising the estimated useful life of the equipment.
Information contains error because management changed its estimates on the useful life of the equipment.
Information is free from error because management has provided enough disclosure regarding the uncertain estimate.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Identify the objective and qualitative
characteristics of financial reporting information and the elements
of financial statements.
90.
Award: 10.00 points
Roy Wilton is a CPA who recently made a poor investment. When researching the investment, Roy examined the financial statements of the firm, but did not
read the accompanying footnotes, and therefore didn’t comprehend the broader context underlying those financial statements. Which of the following is
true with respect to the enhancing qualitative characteristic of understandability in this case?
This demonstrates a violation of understandability, as CPAs should be able to rely on the financial statements alone.
This does not demonstrate a violation of understandability, but rather completeness, as Roy’s understanding was incomplete.
This does not demonstrate a violation of understandability, as Roy did not bother to read the footnotes but could have understood them if he
did so.
This demonstrates a violation of understandability, given that Roy did not comprehend all relevant information.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Identify the objective and qualitative
characteristics of financial reporting information and the elements
of financial statements.
91.
Award: 10.00 points
A constraint on qualitative characteristics of accounting information is:
Neutrality.
Going concern.
Cost-effectiveness.
Timeliness.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Identify the objective and qualitative
characteristics of financial reporting information and the elements
of financial statements.
92.
Award: 10.00 points
According to the conceptual framework, verifiability implies:
Logic.
Legal evidence.
Consensus.
Legal verdict.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Identify the objective and qualitative
characteristics of financial reporting information and the elements
of financial statements.
93.
Award: 10.00 points
Maltec Corporation has started placing its quarterly financial statements on its web page, thereby reducing by 10 days the time to get information to
investors and creditors. The qualitative concept improved is:
Comparability.
Faithful representation.
Timeliness.
Consistency.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Identify the objective and qualitative
characteristics of financial reporting information and the elements
of financial statements.
94.
Award: 10.00 points
Recognizing expected losses immediately, but deferring expected gains, is an example of:
Cost-effectiveness.
Materiality.
Conservatism.
Timeliness.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Identify the objective and qualitative
characteristics of financial reporting information and the elements
of financial statements.
95.
Award: 10.00 points
Change in equity from nonowner sources is:
Comprehensive income.
Revenues.
Expenses.
Gains and losses.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Identify the objective and qualitative
characteristics of financial reporting information and the elements
of financial statements.