Financial Reporting and Analysis: Using Financial Accounting Information 13th test bank

 

 
 
 

c.
Subscriptions paid in advance are recorded as unearned subscription income.
 

 

 
 
 

d.
All significant financial transactions are reported.
 

 
 
 

e.
Personal transactions of the stockholders are not recorded on the company's financial statements.
 

 

 
 
 

f.
Land is recorded at $10,000, which was the amount paid. Current value of the land is $25,000.
 

 

 
 
 

g.
The accountants determine that the company is in danger of going bankrupt and therefore refuse to certify the statements as prepared according to generally accepted accounting principles.
 

 

 

 

 
 
 

h.
The company loses a major customer and does not record a loss.
 

 

 
 
ANS: 
a.
consistency

b.
time period

c.
realization

d.
full disclosure

e.
business entity

f.
historical cost

g.
going concern

h.
transaction approach

 
 
PTS:   1                    DIF:    Difficulty: Moderate                        NAT:  BUSPROG: Communication
STA:   AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP:   Traditional Assumptions of the Accounting Model             KEY:  Bloom's: Comprehension
NOT:  Time: 10 min.          
 
     2.   Listed below are several qualitative characteristics.
 
Required:
Match the characteristic (or characteristics) that goes with each statement.
 
a.
understandability

b.
usefulness for decision making

c.
relevance

d.
reliability

e.
predictive

f.
feedback value

g.
timely

h.
verifiable

i.
representational faithfulness

j.
neutrality

k.
comparability

l.
materiality

m.
benefits of information should exceed its cost

 
 
1.
Two constraints included in the hierarchy.

 
 
 

 
2.
For this quality, the information needs to have predictive and feedback value and be timely.

 
 

 
3.
These are the qualitative characteristics that are viewed as having the most importance.

 
 

 
4.
SFAC No. 2 indicates that to be reliable, the information needs to have these characteristics.

 
 

 
5.
Interacts with relevance and reliability to contribute to the usefulness of information.

 
 

 
6.
Two primary qualities that make accounting information useful for decision making.

 
 

 
7.
For this quality, the information must be verifiable, subject to representational faithfulness, and neutral.

 
 

 
8.
SFAC No. 2 indicates that to be relevant, the information needs to have these characteristics.

 
 

 
 
ANS: 
1.
l, m

2.
c

3.
a, b

4.
h, i, j

5.
k

6.
c, d

7.
d

8.
e, f, g

 
 
PTS:   1                    DIF:    Difficulty: Moderate                        NAT:  BUSPROG: Communication
STA:   AICPA: FN: Measurement | ACBSP: GAAP | IMA: Financial Statement Analysis
TOP:   Development of Generally Accepted Accounting Principles (GAAP) in the United States
KEY:  Bloom's: Comprehension                 NOT:  Time: 10 min.