Exam 2: Accounting Judgements

Charging off the cost of a calculator with an estimated useful life of 10 years as an expense of the period when purchased is an example of the application of the

A furniture builder accepts a purchase order from a client to build a customized dresser.The acceptance of this contract on that date is executory in nature and the builder must thus record a liability on that date.

Explain how the continuity assumption and the historical cost principle are related.

State the accounting assumption,principle,information characteristic,or constraint that is most applicable in the following cases. 1.All significant post-balance sheet events are reported. ________________________________ 2.Personal transactions of the proprietor are distinguished from business transactions. ________________________________ 3.Goodwill is capitalised and amortised over the periods benefited. ________________________________ 4.Assuming that dollars today will buy as much as 10 years ago. ________________________________ 5.Rent paid in advance is recorded as prepaid rent. ________________________________ 6.Financial statements are prepared each year. ________________________________ 7.All payments less than $25 are expensed as incurred.(Do not use conservatism.) ________________________________ 8.The company employs the same inventory valuation method from period to period._______________________________

At the date of purchase of a service which is not immediately used up,the cost of such unused service is a(n):

Under IFRS and ASPE,both assets and liabilities are mostly arises from past events.

The constant dollar capital maintenance approach adjusts for the decline in the asset's productive capacity when reporting earnings.

The time period concept dictates that the reporting period or fiscal period of an entity must be for 12 months.

Relevance is not a function of:

Adjusting entries are needed because an entity:

A firm does not know exactly how long its equipment will last.The firm decides to use shorter rather than longer useful lives for amortizing the equipment.This is an example of:

Timeliness is an ingredient of the qualitative criteria of Relevance Reliability 1 Yes Yes 2 No Yes 3 Yes No 4 No No

Revenue is recognized when service is rendered and collection is probable.

Representational faithfulness is an ingredient of the qualitative criteria of Reliability Relevance 1 Yes Yes 2 No Yes 3 Yes No 4 No No

J.Green is the sole owner and manager of the ABC Lawn and Grass Service.Green purchased a new station wagon only for personal use.Green uses a dump truck in the business.Which of the following assumptions,principles,or constraints would be violated if Green recorded the cost of the station wagon as an asset of the business?

Comparability is an enhancing quality under IFRS and ASPE.

The continuity assumption is the basis for the rule that:

The materiality constraint:

If,in year 1,a company used LIFO; year 2,FIFO; and in year 3,moving average cost for inventory valuation,which of the following assumptions,constraints,or principles would be violated:

The unit of measure assumption holds that all aspects of a company's business operations can be readily quantified.