CHAPTER 1—INTRODUCTION TO FINANCIAL REPORTING
MULTIPLE CHOICE
1. Charging off equipment that cost less than $20 would be an example of the application of:
a.|going concern|
b.|cost|
c.|matching|
d.|materiality|
e.|realization|
ANS: D
2. The going concern assumption:
a.|is applicable to all financial statements|
b.|primarily involves periodic income measurement|
c.|allows for the statements to be prepared under generally accepted accounting principles|
d.|requires that accounting procedures be the same from period to period|
e.|none of the answers are correct|
ANS: C
3. Understating assets and revenues is justified based on:
a.|realization assumption|
b.|matching|
c.|consistency|
d.|realization|
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Understating expenses is justified based on:
a.|time period assumption|
b.|conservatism assumption|
c.|materiality assumption|
d.|matching assumption|
e.|none of the answers are correct|
ANS: E
24. At the end of the fiscal year, an adjusting entry is made that increases salaries payable and increases salaries expense. This entry is an application of which accounting principle?
a.|full disclosure|
b.|materiality|
c.|matching|
d.|realization|
e.|historical cost|
ANS: C
25. Accountants provide for inflation using which of the following accounting principles?
a.|going concern|
b.|time period|
c.|conservatism|
d.|materiality|
e.|none of the answers are correct|
ANS: E
26. Which of these measurement attributes is not currently used in practice?
a.|historical cost|
b.|relevant cost|
c.|current market value|
d.|current cost|
e.|present value|
ANS: B
27. The following data relate to Swift Company for the year ended December 31, 2008. Swift Company uses the accrual basis.
Sales on credit|$250,000|
Cost of inventory sold on credit|170,000|
Collections from customers|220,000|
Purchase of inventory
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In addition to the budgeted operating statement and the actual operating statement for 2010, to increase the analysis a
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3. On the basis of the responses to Question 1 and 2, what are the units of accounting in this arrangement?
It couldn’t effectively deal with the tax collection, flood control, social welfare, and public security. (Original: p. 565; With Sources: p. 883)
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b. The amount of compensation earned and costs incurred under such contracts for each period for which an income statement is presented.”
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