Question 1

An item is not material if:

Accepted Answer

A)  The accounting equation (A = L + O
E)  does not include the item. 
B)  It decreases the qualitative usefulness of the financial statements, but not the quantitative usefulness. 
C)  Its cost is less than $25. 
D)  Its omission will not influence the judgement of a reasonable person. 
A)  The accounting equation (A = L + O
E)  does not include the item. 
B)  It decreases the qualitative usefulness of the financial statements, but not the quantitative usefulness. 
C)  Its cost is less than $25. 
D)  Its omission will not influence the judgement of a reasonable person.

Question 2

Under IFRS 13, Level 3 inputs are deemed to be more reliable than Level 2 inputs.

Accepted Answer

A) True 
 B)False

Question 3

Predictive value is an ingredient of the qualitative criteria of $$\begin{array} { | l | l |l | } 
\hline &\text { Relevance}&\text { Reliabiliy } \
\hline 1& \text { Yes } & \text { No } \
\hline 2& \text { Yes } & \text { Yes } \
\hline 3& \text { No } & \text { No } \
\hline 4& \text { No } & \text { Yes } \
\hline
\end{array}$$

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

When assets are acquired, they should be recorded in the accounts in conformity with the:

Accepted Answer

A)  cost principle. 
B)  full-disclosure principle. 
C)  materiality constraint. 
D)  separate entity assumption. 
E)  matching principle. 
A)  cost principle. 
B)  full-disclosure principle. 
C)  materiality constraint. 
D)  separate entity assumption. 
E)  matching principle.

Question 6

Equity is a residual and as such is not specifically defined in the IFRS Conceptual Framework.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

1. Full disclosure principle.
2. Separat

Question 8

The continuity assumption is the basis for the rule that:

Accepted Answer

A)  the income statement should not include material gains and losses that are both unusual and infrequent. 
B)  treasury stock should not be reported in the balance sheet as an asset. 
C)  the cost of installing a machine should not be included in the recorded cost of the machine, but rather expensed immediately. 
D)  the cost of operational assets should be allocated to expense systematically and rationally over their useful lives. 
A)  the income statement should not include material gains and losses that are both unusual and infrequent. 
B)  treasury stock should not be reported in the balance sheet as an asset. 
C)  the cost of installing a machine should not be included in the recorded cost of the machine, but rather expensed immediately. 
D)  the cost of operational assets should be allocated to expense systematically and rationally over their useful lives.

Question 9

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

Accepted Answer

A)  consistency characteristic. 
B)  matching principle. 
C)  materiality constraint. 
D)  historical cost principle. 
A)  consistency characteristic. 
B)  matching principle. 
C)  materiality constraint. 
D)  historical cost principle.

Question 10

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?

Accepted Answer

A)  Materiality constraint 
B)  Conservatism constraint 
C)  Continuity assumption 
D)  Full-disclosure principle 
E)  Separate entity assumption 
A)  Materiality constraint 
B)  Conservatism constraint 
C)  Continuity assumption 
D)  Full-disclosure principle 
E)  Separate entity assumption

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

When a corporation buys a portion of its own common shares, the recording must conform to the:

Accepted Answer

A)  matching principle. 
B)  cost principle. 
C)  revenue recognition principle. 
D)  accrual principle. 
A)  matching principle. 
B)  cost principle. 
C)  revenue recognition principle. 
D)  accrual principle.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

An example of the full disclosure principle would be a firm signing a major contract in November to construct custom machinery for a client. Work in the current year is nil, yet the notes to the firm's financial statements discuss the nature and dollar amount of the contract.

Accepted Answer

A) True 
 B)False

Question 15

The understandability concept states that the information contained in financial statements should be understandable to persons who have a reasonable understanding of business and economic conditions and are willing to study the information with reasonable diligence.

Accepted Answer

A) True 
 B)False

Question 16

Accounting information is considered to be relevant when it

Accepted Answer

A)  can be depended on to represent the economic conditions and events that it is intended to represent. 
B)  is capable of making a difference to a decision-maker. 
C)  is understandable by reasonably informed users of accounting information. 
D)  is verifiable and neutral. 
A)  can be depended on to represent the economic conditions and events that it is intended to represent. 
B)  is capable of making a difference to a decision-maker. 
C)  is understandable by reasonably informed users of accounting information. 
D)  is verifiable and neutral.

Question 17

The separate entity assumption has more validity for a larger corporation than it would for a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 18

The measurement conventions of accounting include all of the following except:

Accepted Answer

A)  continuity. 
B)  full-disclosure. 
C)  historical cost. 
D)  matching. 
E)  revenue recognition. 
A)  continuity. 
B)  full-disclosure. 
C)  historical cost. 
D)  matching. 
E)  revenue recognition.

Question 19

Legally, as well as for accounting statement purposes, a corporation is treated as a separate entity apart from its stockholders, whereas a partnership is treated as one entity including the owners.

Accepted Answer

A) True 
 B)False

Question 20

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.

An item is not material if:

Under IFRS 13, Level 3 inputs are deemed to be more reliable than Level 2 inputs.

Predictive value is an ingredient of the qualitative criteria of Relevance Reliabiliy 1 Yes No 2 Yes Yes 3 No No 4 No Yes

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

When assets are acquired, they should be recorded in the accounts in conformity with the:

Equity is a residual and as such is not specifically defined in the IFRS Conceptual Framework.

The continuity assumption is the basis for the rule that:

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.

When a corporation buys a portion of its own common shares, the recording must conform to the:

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

An example of the full disclosure principle would be a firm signing a major contract in November to construct custom machinery for a client. Work in the current year is nil, yet the notes to the firm's financial statements discuss the nature and dollar amount of the contract.

The understandability concept states that the information contained in financial statements should be understandable to persons who have a reasonable understanding of business and economic conditions and are willing to study the information with reasonable diligence.

Accounting information is considered to be relevant when it

The separate entity assumption has more validity for a larger corporation than it would for a sole proprietorship.

The measurement conventions of accounting include all of the following except:

Legally, as well as for accounting statement purposes, a corporation is treated as a separate entity apart from its stockholders, whereas a partnership is treated as one entity including the owners.

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 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

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 2: Accounting Judgements

An item is not material if:

Under IFRS 13, Level 3 inputs are deemed to be more reliable than Level 2 inputs.

Predictive value is an ingredient of the qualitative criteria of Relevance Reliabiliy 1 Yes No 2 Yes Yes 3 No No 4 No Yes

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

When assets are acquired, they should be recorded in the accounts in conformity with the:

Equity is a residual and as such is not specifically defined in the IFRS Conceptual Framework.

The continuity assumption is the basis for the rule that:

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.

When a corporation buys a portion of its own common shares, the recording must conform to the:

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

An example of the full disclosure principle would be a firm signing a major contract in November to construct custom machinery for a client. Work in the current year is nil, yet the notes to the firm's financial statements discuss the nature and dollar amount of the contract.

The understandability concept states that the information contained in financial statements should be understandable to persons who have a reasonable understanding of business and economic conditions and are willing to study the information with reasonable diligence.

Accounting information is considered to be relevant when it

The separate entity assumption has more validity for a larger corporation than it would for a sole proprietorship.

The measurement conventions of accounting include all of the following except:

Legally, as well as for accounting statement purposes, a corporation is treated as a separate entity apart from its stockholders, whereas a partnership is treated as one entity including the owners.

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 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

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters