29 Jun Question 1. Four different competent acc
Question
1. Four different competent accountants independently agree on the amount and method of reporting an economic event. The concept demonstrated is:
A. Reliability.
B. Comparability.
C. Completeness.
D. Verifiability.
E. All of the above
2. Which of the following best demonstrates the full disclosure principle?
A. The multi-step income statement.
B. The auditors’ report.
C. The company’s tax return.
D. Notes to financial statements.
E. None of the above.
3. Disclosure notes to a company’s financial statements:
A. Are relatively unimportant facts that don’t belong in the basic financial statements.
B. Document the source of financial statement facts, like literary footnotes.
C. Are an integral part of a company’s financial statements.
D. Are irrelevant facts that are immaterial in amount.
E. None of the above.
4. An important argument in support of historical cost information is:
A. Relevance.
B. Predictive quality for future cash flows.
C. Materiality.
D. Verifiability.
E. All of the above
5. Primecoat Corporation could disseminate its annual financial statements two days earlier if it shifted substantial human resources from other operations to the annual report project. Management decided the value of the earlier report was not worth the added commitment of resources. The concept best demonstrated is:
A. Timeliness.
B. Materiality.
C. Relevance.
D. Cost effectiveness.
E. All of the above.
6. Mega Loan Company has very stringent credit requirements and, accordingly, has negligible losses from uncollectible accounts. The company’s independent accountants did not protest when, contrary to GAAP, the company recorded bad debt expense only when specific accounts were determined to be uncollectible, rather than use an allowance for uncollectible accounts. The concept demonstrated is:
A. Comparability.
B. Faithful representation.
C. Cost effectiveness.
D. Materiality.
E. Two of the above are correct.
7. Recognizing expected losses immediately, but deferring expected gains, is an example of:
A. Materiality.
B. Conservatism.
C. Cost effectiveness.
D. Timeliness.
E. All of the above
8. According to the conceptual framework, verifiability implies:
A. Legal evidence.
B. Logic.
C. Consensus.
D. Legal verdict.
E. None of the above.
9. Land was acquired in 2012 for a future building site at a cost of $40,000. The assessed valuation for tax purposes is $27,000, a qualified appraiser placed its value at $48,000, and a recent firm offer for the land was for a cash payment of $46,000. The land should be reported in the financial statements at:
A. $40,000.
B. $27,000.
C. $46,000.
D. $48,000.
E. None of the above.
10. Of the following, the most important objective for financial reporting is to provide information useful for:
A. Making decisions.
B. Determining taxable income.
C. Providing accountability.
D. Increasing future profits.
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