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Exam 2: Accounting Judgements

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Question 71

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Which of the following is NOT a time when revenue may be recognized?

A) At time of sale of goods.
B) At receipt of cash from sale of goods.
C) During production of goods.
D) Sale of Property of a manufacturing company.

E) None of the above
F) B) and C)

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Question 72

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The going concern or continuity assumption is critical to financial accounting. The assumption

A) Is always maintained for all firms for all years.
B) Supports the use of historical cost valuation for assets rather than market values.
C) Means that a corporation has a definite ending date.
D) Requires that we immediately expense prepaid accounts because they do not represent a future cash inflow.

E) All of the above
F) A) and B)

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Question 73

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The use of deferrals and accruals is a direct result of the:

Adjusting entries are needed because an entity:

Information is reliable when it is in agreement with the actual underlying transactions and events, the agreement is capable of independent verification and the information is reasonably free from error and bias.

The list price of a new van was $30,000 at a local car dealership. However, a customer convinced the dealer to sell the van for $25,000 (the van had cost the dealer $20,000 one year earlier) . The van would cost the dealer $24,000 today. Inflation is 5% per year. The amount of profit that would be recognized by the dealer as a result of the sale using the constant dollar financial capital maintenance approach is:

Accounting traditionally has been influenced by conservatism because of the:

The organization created to develop accounting standards in Canada, the AcSB, is LEAST concerned with:

A corporation reports the sale of some of its shares to a shareholder in its financial statements, and the shareholder reports the same transaction as an investment. Therefore,

The information provided by financial reporting pertains to:

The nominal dollar capital maintenance approach implicitly recognizes that inflation is under control, and thus ignores inflation in the preparation of financial statements.

Neutrality is an ingredient of the qualitative criteria of $\begin{array}{|l|l|l|}\hline &\text { Relevance}&\text{reliabiliy } \\\hline 1&\text { Yes } & \text { Yes } \\\hline 2&\text { No } & \text { Yes } \\\hline 3&\text { Yes } & \text { No } \\\hline 4&\text { No } & \text { No } \\\hline\end{array}$

The nominal dollar capital maintenance approach is the mostly widely used application of the stable currency assumption in North American practice.

The use of deferrals and accruals in accounting relates to the Time Period Assumption.

Which of the following accounting concepts states that before a transaction is recorded, sufficient evidence must exist to allow two or more knowledgeable individuals to reach essentially the same conclusion about the transaction?

Recording periodic depreciation on assets such as buildings or machinery is an application of the:

The matching concept is the name applied to the process of associating expenses with revenues.

Predictive value is a component of representational faithfulness.

Comparability is sometimes sacrificed for consistency.

A firm's accounting policy is to immediately expense the cost of metal wastebaskets it purchases for use by its employees at their desks. The total cost of wastebaskets in any year is $1,000 and the firm has $6 billion in total assets. The firm expects the wastebaskets to last indefinitely. The firm