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Exam 14: Accounting Principles and Reporting Standards

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Question 31

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What two tests must be met in order for revenues to be recognized?

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Revenues must have b...

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Question 32

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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 did not choose to depreciate it. The modifying convention that the accountant followed was

A) materiality.
B) objectivity.
C) conservatism.
D) industry practice.

E) B) and C)
F) C) and D)

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Question 33

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If the ____________________ basis of accounting is used, income is recorded in the period in which it is earned.

How are the concepts of materiality and cost-benefit related?

Hour Place Clock Repair paid $2,400 cash in advance for a six month advertising contract with the local newspaper. According to the matching principle, if 2 months of the contract has expired by the end of the current fiscal year, how much should Hour Place Clock Repair report as Advertising Expense on the Income Statement?

Match the accounting terms with the descriptions by entering the proper number.

Depreciating equipment over its useful life is an example of

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

The ____________________ basis of accounting means that business transactions are recorded based on an "arm's length" transaction in the market.

Antonio Hanley owns a small automobile service center. He recently approached the local bank for a loan to finance an expansion of his service center. Antonio prepared the balance sheet given below and submitted it with his loan application. The balance sheet does not conform to generally accepted accounting principles. Using the additional information provided by the owner, prepare a corrected balance sheet in accordance with generally accepted accounting principles. $\begin{array}{l}\text { Liabilities and Owner's Equity }\\\begin{array} { l r } \text { Accounts Payable } & 46,000 \\\text { Note Payable on Family Car } & 18,000 \\\text { Note Payable on Truck } & 12,000 \\\text { Mortgage on House } & 254,000 \\\text { Antonio Hanley, Capital } & \underline { 268,000 } \\\text { Total Liabilities and Owner's Equity } & \underline { \underline { 598,000 } }\end{array}\end{array}$ Additional information provided by owner: 1. The inventory has an original cost of $\$ 84,000$ . It is listed on the balance sheet at what it would cost to purchase today. 2. Included in the cash listed on the balance sheet is $\$ 8,000$ in Antonio Hanley's personal checking account. 3. Depreciation allowable to date on the equipment is $\$ 10,000$ . Depreciation allowable to date on the truck is $\$ 6,000$ .

When Tamar Snyder opened a shoe store, her accountant did not include the cash in her personal savings account as one of the assets of the business. This is an example of

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

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 block away recently sold for $113,000. How much should Holly Day Company report on its balance sheet for the piece of land?

In order to ensure that they are meaningful and useful, financial statements should be prepared

What is meant by the concept of neutrality in accounting?

creditemployees during the last four days of the year, even though the wages will not be paid in that year. The accountant is following the ____________________ principle.

Because of the modifying convention of ____________________, assets are understated rather than overstated if any uncertainty exists.

When a new company was formed, one partner contributed some used equipment he owned. The equipment was appraised at $44,000 and $50,000 by two different dealers. The accountant entered the equipment at $44,000 in the financial records of the partnership. This is an example of

Assets are carried on the books at historical cost.