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CHAPTER 2 CONCEPTUAL FRAMEWORK UNDERLYING FINANCIAL ACCOUNTING

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Question;118. Application;of the full disclosure principle;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 explaining the effects of financing;arrangements.;d. requires;that the financial statements be consistent and comparable.;119. Which of the following is an argument;against using historical cost in accounting?;a. Fair;values are more relevant.;b. Historical;costs are based on an exchange transaction.;c. Historical;costs are reliable.;d. Fair;values are subjective.;120. When is revenue generally recognized?;a. When;cash is received.;b. When;the warranty expires.;c. When;production is completed.;d. When;the company satisfies the performance obligation.;121. Which of the following is a component of;the revenue recognition principle?;a. Cash;is received and the amount is material.;b. Recognition;occurs when the performance obligation is satisfied.;c. Production;is complete and there is an active market for the product.;d. Cash;is realized or realizable and production is complete.;122. A company has a performance obligation when;it agrees to;a. Perform;a service for a customer and receives cash payment.;b. Sell;a product to a customer after receiving payment.;c. Perform;a service or sell a product to a customer.;d. None;of these answers are correct.;123. Which;of the following is not a required;component of financial statements prepared in accordance with generally;accepted accounting principles?;a. President?s;letter to shareholders.;b. Statement;of financial position.;c. Income;statement.;d. Notes;to financial statements.;124. What is the general approach as to when;product costs are recognized as expenses?;a. In;the period when the expenses are paid.;b. In;the period when the expenses are incurred.;c. In;the period when the vendor invoice is received.;d. In;the period when the related revenue is recognized.;125. Not adjusting the amounts reported in the;financial statements for inflation is an example of which basic assumption or principle;of accounting?;a. Economic;entity.;b. Going;concern.;c. Monetary;unit.;d. Full;disclosure.;126. Recognition of expense related to;amortization of an intangible asset illustrates which principle of accounting?;a. Expense;recognition.;b. Full;disclosure.;c. Revenue;recognition.;d. Historical;cost.;127. When should an expenditure be recorded as;an asset rather than an expense?;a. Never.;b. Always.;c. If;the amount is material.;d. When;future benefit exists.;128. Which;accounting assumption or principle is being violated if a company is a party to;major litigation that it may lose and decides not to include the information in the financial statements because;it may have a negative impact on the company?s share price?;a. Full;disclosure.;b. Going;concern.;c. Historical;cost.;d. Expense;recognition.

 

Paper#55034 | Written in 18-Jul-2015

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