Question 1

Comparability is sometimes sacrificed for consistency.

Accepted Answer

A) True 
 B)False

Question 2

In classifying the elements of financial statements,the primary distinction between revenues and gains is the materiality of the amounts involved.

Accepted Answer

A) True 
 B)False

Question 3

At times,reliability must be sacrificed in order to enhance the relevance of accounting information.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is the incorrect basis for recognizing the expense indicated?

Accepted Answer

A) Sales commissions expense on the basis of relationship with sales. 
B) Administrative salaries expense recognized as incurred. 
C) Amortization expense on the basis of time. 
D) Cost of goods sold expense on a subjective or arbitrary basis. 
A) Sales commissions expense on the basis of relationship with sales. 
B) Administrative salaries expense recognized as incurred. 
C) Amortization expense on the basis of time. 
D) Cost of goods sold expense on a subjective or arbitrary basis.

Question 5

Revenue is recognized when

Accepted Answer

A) It is collected in cash 
B) Service is rendered 
C) Service is rendered and collection is probable 
D) The contract is signed 
E) When the customer places the order 
A) It is collected in cash 
B) Service is rendered 
C) Service is rendered and collection is probable 
D) The contract is signed 
E) When the customer places the order

Question 6

A corporation needed a new warehouse; a contractor quoted a $250,000 price to construct it.The corporation believed that it could build the warehouse for $215,000 and decided to use company employees to construct the warehouse.The final construction cost incurred by the corporation was $240,000 but the asset was recorded at $250,000.This is in violation of the:

Accepted Answer

A) cost principle. 
B) time period assumption. 
C) matching principle. 
D) revenue recognition principle. 
E) None of these answers are correct. 
A) cost principle. 
B) time period assumption. 
C) matching principle. 
D) revenue recognition principle. 
E) None of these answers are correct.

Question 7

Interperiod tax allocation is the process of spreading the income tax expense across periods benefited.

Accepted Answer

A) True 
 B)False

Question 8

Under ASPE,feedback value is an ingredient of: $$\begin{array} { | l |l |l | } 
\hline & \text { Relevance } & \text { Reliability } \
\hline 1 & \text { Yes } & \text { Yes } \
\hline 2 & \text { Yes } & \text { No } \
\hline 3 & \text { No } & \text { No } \
\hline 4 & \text { No } & \text { Yes } \
\hline
\end{array}$$

Accepted Answer

A) Choice 1 
B) Choice 2 
C) Choice 3 
D) Choice 4 
A) Choice 1 
B) Choice 2 
C) Choice 3 
D) Choice 4

Question 9

The quality of information that gives assurance that it is reasonably free of error and bias and is a faithful representation is

Accepted Answer

A) relevance. 
B) reliability. 
C) verifiability. 
D) neutrality. 
E) None of these answers are correct. 
A) relevance. 
B) reliability. 
C) verifiability. 
D) neutrality. 
E) None of these answers are correct.

Question 10

A corporation reports the sale of some of its shares to a shareholder in its financial statements,and the shareholder reports the same transaction as an investment.Therefore,

Accepted Answer

A) the revenue recognition principle has been violated. 
B) the separate entity assumption has been violated. 
C) the double entry accounting concept has been violated. 
D) no accounting concept has been violated. 
A) the revenue recognition principle has been violated. 
B) the separate entity assumption has been violated. 
C) the double entry accounting concept has been violated. 
D) no accounting concept has been violated.

Question 11

Revenues and expenses often are recognized in income statement accounts even though no cash has been received or paid.This is primarily a result of applying the:

Accepted Answer

A) full-disclosure principle. 
B) continuity assumption. 
C) revenue recognition principle. 
D) accrual basis of accounting. 
A) full-disclosure principle. 
B) continuity assumption. 
C) revenue recognition principle. 
D) accrual basis of accounting.

Question 12

The use of historical cost,rather than liquidation value,is supported by the continuity assumption.

Accepted Answer

A) True 
 B)False

Question 13

Under IFRS 13,a publicly quoted share price would be an example of a Level 1 Input.

Accepted Answer

A) True 
 B)False

Question 14

The continuity assumption holds that a business will carry on indefinitely.

Accepted Answer

A) True 
 B)False

Question 15

Relevance is of primary importance in financial reporting,whereas comparability is of secondary importance.

Accepted Answer

A) True 
 B)False

Question 16

S Corporation offered to issue 5,000 shares of its no par value common shares to another company in exchange for a building at a time when there were 1,000,000 shares already outstanding and were selling for $4.00 per share at the time.The owner of the building had the opportunity to sell it to a competing buyer for $26,000.However,because the seller wanted the S Corporation shares,S's offer was accepted.At what amount should the building be reported in S's financial statements?

Accepted Answer

A) $26,000 
B) $10,000 
C) $20,000 
D) $16,000 
A) $26,000 
B) $10,000 
C) $20,000 
D) $16,000

Question 17

Application of the full disclosure principle

Accepted Answer

A) is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits. 
B) is violated when important financial information is buried in the notes to the financial statements. 
C) is demonstrated by the use of supplementary information presenting the effects of changing prices. 
D) requires that the financial statements be consistent and comparable. 
A) is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits. 
B) is violated when important financial information is buried in the notes to the financial statements. 
C) is demonstrated by the use of supplementary information presenting the effects of changing prices. 
D) requires that the financial statements be consistent and comparable.

Question 18

When an $30 asset with a six-year estimated useful life is recorded as an expense at the date of purchase,this is an application of the:

Accepted Answer

A) matching principle. 
B) cost principle. 
C) unit-of-measure assumption. 
D) materiality constraint. 
E) None of these answers are correct. 
A) matching principle. 
B) cost principle. 
C) unit-of-measure assumption. 
D) materiality constraint. 
E) None of these answers are correct.

Question 19

The continuity assumption holds that the entity will continue in business for the foreseeable future but it does not mean that it will be a going concern forever.

Accepted Answer

A) True 
 B)False

Question 20

The recognition of periodic amortization expense on company-owned automobiles requires estimating both salvage or residual value,and the useful life of the vehicles.The use of estimates in this case is an example of:

Accepted Answer

A) Conservatism 
B) Maintaining consistency 
C) Invoking the materiality constraint rather than the cost benefit constraint 
D) Providing relevant data at the expense of reliability 
E) None of these answers are correct. 
A) Conservatism 
B) Maintaining consistency 
C) Invoking the materiality constraint rather than the cost benefit constraint 
D) Providing relevant data at the expense of reliability 
E) None of these answers are correct.

Comparability is sometimes sacrificed for consistency.

In classifying the elements of financial statements,the primary distinction between revenues and gains is the materiality of the amounts involved.

At times,reliability must be sacrificed in order to enhance the relevance of accounting information.

Which of the following is the incorrect basis for recognizing the expense indicated?

Revenue is recognized when

Interperiod tax allocation is the process of spreading the income tax expense across periods benefited.

Under ASPE,feedback value is an ingredient of: Relevance Reliability 1 Yes Yes 2 Yes No 3 No No 4 No Yes

The quality of information that gives assurance that it is reasonably free of error and bias and is a faithful representation is

A corporation reports the sale of some of its shares to a shareholder in its financial statements,and the shareholder reports the same transaction as an investment.Therefore,

Revenues and expenses often are recognized in income statement accounts even though no cash has been received or paid.This is primarily a result of applying the:

The use of historical cost,rather than liquidation value,is supported by the continuity assumption.

Under IFRS 13,a publicly quoted share price would be an example of a Level 1 Input.

The continuity assumption holds that a business will carry on indefinitely.

Relevance is of primary importance in financial reporting,whereas comparability is of secondary importance.

Application of the full disclosure principle

When an $30 asset with a six-year estimated useful life is recorded as an expense at the date of purchase,this is an application of the:

The continuity assumption holds that the entity will continue in business for the foreseeable future but it does not mean that it will be a going concern forever.

The recognition of periodic amortization expense on company-owned automobiles requires estimating both salvage or residual value,and the useful life of the vehicles.The use of estimates in this case is an example of:

The Framework for Financial Reporting

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Depreciation,Amortization,and Impairment

Financial Instruments: Investments in Debt and Equity Securities

Filters

Exam 2: Accounting Judgements

Comparability is sometimes sacrificed for consistency.

In classifying the elements of financial statements,the primary distinction between revenues and gains is the materiality of the amounts involved.

At times,reliability must be sacrificed in order to enhance the relevance of accounting information.

Which of the following is the incorrect basis for recognizing the expense indicated?

Revenue is recognized when

Interperiod tax allocation is the process of spreading the income tax expense across periods benefited.

Under ASPE,feedback value is an ingredient of: Relevance Reliability 1 Yes Yes 2 Yes No 3 No No 4 No Yes

The quality of information that gives assurance that it is reasonably free of error and bias and is a faithful representation is

A corporation reports the sale of some of its shares to a shareholder in its financial statements,and the shareholder reports the same transaction as an investment.Therefore,

Revenues and expenses often are recognized in income statement accounts even though no cash has been received or paid.This is primarily a result of applying the:

The use of historical cost,rather than liquidation value,is supported by the continuity assumption.

Under IFRS 13,a publicly quoted share price would be an example of a Level 1 Input.

The continuity assumption holds that a business will carry on indefinitely.

Relevance is of primary importance in financial reporting,whereas comparability is of secondary importance.

Application of the full disclosure principle

When an $30 asset with a six-year estimated useful life is recorded as an expense at the date of purchase,this is an application of the:

The continuity assumption holds that the entity will continue in business for the foreseeable future but it does not mean that it will be a going concern forever.

The recognition of periodic amortization expense on company-owned automobiles requires estimating both salvage or residual value,and the useful life of the vehicles.The use of estimates in this case is an example of:

The Framework for Financial Reporting

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Depreciation,Amortization,and Impairment

Financial Instruments: Investments in Debt and Equity Securities

Filters