(To obtain the answer, scroll down each box below the question.)
Verifiability
Predictive value
Neutrality
Due process
Accounting information that users can depend on to
represent the economic conditions or events that it purports to represent
best defines.
Relevance.
Timeliness.
Feedback value.
Reliability..
Accounting information is
relevant to the extent that it has the capacity to make a difference in a
decision by a user. According to SFAC No. 2,"Qualitative
Characteristics of Accounting Information," relevant information must
provide
Representational
faithfulness.
Neutrality.
Freedom from errors.
Feedback value.
Statement of Financial
Accounting Concepts No. 5, "Recognition and Measurement in Financial
Statement of Business Enterprises," indicates that in order for an
event to be recognized in financial statements, it must be
Relevant, reliable, and
measurable.
Relevant,
reliable, and useful
Relievable ,reliable,
and timely.
Reliable, useful, and
measurable.
Accounting information
that enables decision makers to confirm or correct prior expectations is
said to have
Predictive value.
Materiality.
Representational
faithfulness.
Feedback value.
The historical cost of
assets and liabilities is generally retained in accounting records because
this information has the qualitative characteristics of
Neutrality,
verifiability, and representational faithfulness’..
Reliability and
relevant.
Decision usefulness,
reliability, and neutrality.
Timeliness,
verifiability, and relevance.
Limitations of the
statement of financial position include all of the following except
The use of historical
cost for valuing assets and liabilities.
Inclusion of
information on capital maintenance.
Exclusion of some
economic resources and obligations.
The use of estimates in
the determination of certain items.
In Statement of Financial Accounting Concepts
No. 5, "Recognition and Measurement in Financial Statement of
Business Enterprises", several alternatives have been identified
for measuring items on the statement of financial position. Which of the
following alternatives may be used?
Present Current Net
Realizable
Value
Cost
Value
No
No
No
No
Yes Yes
Yes
Yes No
Yes
Yes Yes
In a multiple-step income statement for a retail
company, all of the following would be included in the operation section
except
Sales.
Cost of goods
sold.
Dividend revenue.
Administrative
expenses.
Chapter 2 -- BALANCE SHEET: ASSETS
When classifying assets as current and noncurrent for
reporting purposes,
The amounts at which current assets are carried and reported must reflect
realizable cash values.
Assets are classified
as current if they are reasonably expected to be realized in cash or
consumed during the normal operating cycle.
Prepayments for items
such as insurance or rent are included in an "other assets"
group rather than as current assets as they will ultimately be expensed.
The time period by
which current assets are distinguished from noncurrent assets is
determined by the seasonal nature of the business
.
Investments
classified as trading securities are valued on the Statement of Financial
Position at
Fair
value.
Amortized
cost.
Lower
of cost or market.
Present
value of future cash flows.
.
Investments
in noncurrent debt securities which a firm both intends and is able to hold
to maturity are valued on the Statement of financial Position at
Amortized
cost.
Lower
of cost at market.
Present
value of future cash flows.
Par
or stated value of the securities.
.
An
investment in available -for-sale securities is valued on the Statement of
Financial Position at the
Cost to acquire the
asset.
Accumulated income less
accumulated dividends since acquisition.
Lower of cost or
market.
Fair value.
.
A decline
in the value of an available-for-sales security below cost that is deemed to
be other than temporary should
Be accumulated in a
valuation allowance resulting from the passage of time.
Be treated as a
realized loss and included in the determination of net income for the
period.
Not be realized until
the security is sold.
Be treated as an
unrealized loss and included in the equity section of the balance sheet
as a separate item.
.
APB Opinion
No 18, "The Equity Method of Accounting for Investments in Common
Stock," provided guidance that a company should apply the equity method
whenever it could exercised significant influence over the investee.
"Significant influence" is defined as
25% ownership.
10% ownership.
20% ownership.
50% ownership.
.
On
January 1, 19x6, Boggs, Inc. paid $700,000 for 100.000 shares of Mattly
corporation representing 30 percent of Mattly's outstanding common
stock. The following computation was made by Boggs.
Purchase
price
30
percent equity in book value of Mattly's net assets
Excess
cost over book value
$700,000
500,000
$200,000
The
excess cost over book value was attributed to goodwill and will be amortized
over 20 years. Mattly reported net income for the year ended December 31, 19x6,
of $300,000. Mattly Corporation paid cash dividends of $100,0000 on July
1, 19x6.
25% ownership.
10% ownership.
20% ownership.
50% ownership.
.
On the Statement of Financial Position,
accounts receivable is valued at the
Current market value.
Estimated net
realizable value.
Original cost when the
asset was acquired.
Amount payable when due.
Bad debt expense must be estimated in order
to satisfy the matching principle where expenses are recorded in the same
periods as the related revenues. In estimating the provision for doubtful
accounts for a period, companies accrue
