Ch1 Analysis

CHAPTER 1—INTRODUCTION TO FINANCIAL REPORTING

MULTIPLE CHOICE

1. Charging off equipment that cost less than $20 would be an example of the application of:
a.|going concern|
b.|cost|
c.|matching|
d.|materiality|
e.|realization|

ANS: D

2. The going concern assumption:
a.|is applicable to all financial statements|
b.|primarily involves periodic income measurement|
c.|allows for the statements to be prepared under generally accepted accounting principles|
d.|requires that accounting procedures be the same from period to period|
e.|none of the answers are correct|

ANS: C

3. Understating assets and revenues is justified based on:
a.|realization assumption|
b.|matching|
c.|consistency|
d.|realization|
e.|none of the answers are correct|

ANS: E

4. The assumption that enables us to prepare periodic statements between the time that a business commences operations and the time it goes out of business is:
a.|time period|
b.|business entity|
c.|historical cost|
d.|transaction|
e.|none of the answers are correct|

ANS: A

5. Valuing assets at their liquidation values is not consistent with:
a.|conservatism|
b.|materiality|
c.|going concern|
d.|time period|
e.|none of the answers are correct|

ANS: C

6. The business being separate and distinct from the owners is an integral part of the:
a.|time period assumption|
b.|going concern assumption|
c.|business entity assumption|
d.|realization assumption|
e.|none of the answers are correct|

ANS: C

7. The principle that assumes the reader of the financial statements is not interested in the liquidation values is:
a.|conservatism|
b.|matching|
c.|time period|
d.|realization|
e.|none of the answers are correct|

ANS: E

8. An accounting period that ends when operations are at a low ebb is:
a.|a calendar year|
b.|a fiscal year|
c.|the natural business year|
d.|an operating year|
e.|none of the answers are correct|

ANS: C