B) stable monetary unit assumption
C) cost assumption
D) reliability assumption
Answer: C
Diff: 1 Type: MC
L.O.: 1-4
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
6) The relevant measure of value of the assets of a company that is going out of business is its:
A) historical cost
B) recorded value
C) book value
D) liquidation value
Answer: D
Diff: 2 Type: MC
L.O.: 1-4
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
7) The CEO of a business owns a home and two automobiles. The company the CEO works for also owns automobiles and a home in a remote area used for strategic planning meetings by its executives. Which principle or assumption "draws a sharp boundary" around the possessions of the CEO and the assets of the business for which he works?
A) the entity assumption
B) the stable-monetary-unit assumption
C) the going-concern assumption
D) the objectivity assumption
Answer: A
Diff: 2 Type: MC
L.O.: 1-4
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
8) The stable-monetary-unit assumption is the basis for ignoring:
A) the possibility that the value of inventory might drop below its historical cost
B) fluctuations in the value of the Canadian dollar relative to foreign currencies
C) the effect of inflation in the accounting records
D) the difference between the appraised value and the actual cost when recording an asset at its historical cost
Answer: C
Diff: 3 Type: MC
L.O.: 1-4
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
9) The reliability principle states that assets and services should be recorded at their actual cost, since cost is a reliable measure to use in financial accounting.
Answer: FALSE
Diff: 1 Type: TF
L.O.: 1-4
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
10) Relevance and comparability are the two fundamental qualitative characteristics of accounting.
Answer: FALSE
Explanation: Comparability is an enhancing qualitative characteristic; faithful representation is the other fundamental qualitative characteristic.
Diff: 2 Type: TF
L.O.: 1-4
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting