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Exam 14: Accounting Principles and Reporting Standards

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Question 21

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The basic financial reports of a business provide users with information about all of the following with the exception of

A) claims against the assets (liabilities and owner's equity) .
B) economic resources (assets) .
C) competitors of a business.
D) profits.

E) A) and C)
F) C) and D)

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Question 22

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Holly Day Company purchased a piece of land 10 years ago for $50,000. Holly Day Company is considering selling the land. The piece of land was recently appraised for $120,000, they received an offer from a prospective buyer for $105,000, and a similar piece of land 5 blocks away recently sold for $113,000. How much should Holly Day Company report on its balance sheet for the piece of land?

A) $113,000
B) $105,000
C) $50,000
D) $120,000

E) None of the above
F) A) and D)

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Question 23

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The ________ principle requires important facts that would have an effect on an investor's decisions be included in the financial statements.

Identify the statement below that is not correct regarding generally accepted accounting principles (GAAP) .

An accountant who records revenue when a credit sale is made rather than waiting for the receipt of cash from the customer is

Hour Place Clock Repair paid $2,580 cash in advance for a one year insurance policy. According to the matching principle, if 3 months of the policy has expired by the end of the current fiscal year, how much should Hour Place Clock Repair report as Insurance Expense on the Income Statement?

Paige Turner Publishing receives cash from its subscribers in advance for a one year subscription. Under the revenue recognition principle, Paige Turner Publishing should recognize the revenue from the subscriptions

Assets are carried on the books at historical cost.

Paige Turner Publishing's employees worked the last 3 days of December 2019, that they will not be paid for until January 2020. According to the matching principle, Paige Turner Publishing should recognize the wages expense for the last 3 days of 2019

The Garrison Company offers terms of net 30 days for its credit sales, recording the revenue from the sales when the cash is received from the customers. Garrison Company is

Assets are recorded at cost when they are purchased, but the asset accounts are adjusted each year to reflect changes in market value.

Why are notes important in financial statements and when should they be provided?

Because of the modifying constraint of ________, if uncertainty exists, assets are understated rather than overstated.

The Statements of Financial Accounting Standards that automatically become generally accepted accounting principles are issued by

If an expenditure that is expected to benefit future periods is made during one accounting period, the cost should be divided and charged as an expense during each period benefited.

The New York Mets received cash from their season ticket holders for the entire season in advance. Under the revenue recognition principle, the New York Mets should recognize the revenue from the season ticket holders

The SEC has authority to define accounting terms and to prescribe accounting procedures used by all ________ held corporations.

Keeping the personal assets of the owner of a business separate from the assets of the firm is an example of

Which of the following important types of documents are not issued by the Accounting Standards Executive Committee?

An accountant charged the Repairs Expense account for a tool that cost $12. The tool had an estimated useful life of 5 years; however, the accountant chose not to depreciate it. The modifying constraint that the accountant followed was