Chapter 2 Hw Help

Front 1

Quality of information that assures users that information represents the economic phenomena that it purports to represent.

Back 1

Faithful Representation

Front 2

Information about an economic phenomenon that changes past or present expectations based on previous evaluations.

Back 2

Confirmatory Value

Front 3

The extent to which information is accurate in representing the economic substance of a transaction.

Back 3

Free From Error

Front 4

Includes all the information that is necessary for a faithful representation of the economic phenomena that it purports to represent.

Back 4

Completeness

Front 5

Quality of information that allows users to comprehend its meaning.

Back 5

Understandability

Front 6

The annual reports of Best Buy Co. are audited by certified public accountants.

Back 6

Verifiability

Front 7

Black & Decker and Cannondale Corporation both use the FIFO cost flow assumption.

Back 7

Comparability

Front 8

Starbucks Corporation has used straight-line depreciation since it began operations.

Back 8

Comparability

Front 9

Motorola issues its quarterly reports immediately after each quarter ends.

Back 9

Timeliness

Front 10

The economic activities of FedEx Corporation are divided into 12-month periods for the purpose of issuing annual reports.

Back 10

Periodicity

Front 11

Solectron Corporation, Inc. does not adjust amounts in its financial statements for the effects of inflation.

Back 11

Monetary Unit

Front 12

Walgreen Co. reports current and noncurrent classifications in its balance sheet.

Back 12

Going Concern

Front 13

The economic activities of General Electric and its subsidiaries are merged for accounting and reporting purposes.

Back 13

Economic Entity

Front 14

The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability. TF

Back 14

False

Front 15

Relevant information only has predictive value, confirmatory value, or both. TF

Back 15

False

Front 16

Information that is a faithful representation is characterized as having predictive or confirmatory value. TF

Back 16

False

Front 17

Comparability pertains only to the reporting of information in a similar manner for different companies. TF

Back 17

False

Front 18

Verifiability is solely an enhancing characteristic for faithful representation. TF

Back 18

False

Front 19

In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities. TF

Back 19

True

Front 20

What is the quality of information that enables users to confirm or correct prior expectations?

Back 20

Confirmatory Value

Front 21

Identify the pervasive constraint developed in the conceptual framework.

Back 21

Cost/Benefit

Front 22

The chairman of the SEC at one time noted, “If it becomes accepted or expected that accounting principles are determined or modified in order to secure purposes other than economic measurement, we assume a grave risk that confidence in the credibility of our financial information system will be undermined.” Which qualitative characteristic of accounting information should ensure that such a situation will not occur?

Back 22

Neutrality

Front 23

Muruyama Corp. switches from FIFO to average-cost to FIFO over a 2-year period. Which qualitative characteristic of accounting information is not followed?

Back 23

Comparability

Front 24

Assume that the profession permits the savings and loan industry to defer losses on investments it sells because immediate recognition of the loss may have adverse economic consequences on the industry. Which qualitative characteristic of accounting information is not followed?

Back 24

Neutraility

Front 25

What are the two fundamental qualities that make accounting information useful for decision-making?

Back 25

Relevance and Faithful Representation

Front 26

Watteau Inc. does not issue its first-quarter report until after the second quarter’s results are reported. Which qualitative characteristic of accounting is not followed?

Back 26

Timeliness

Front 27

Predictive value is an ingredient of which of the two fundamental qualities that make accounting information useful for decision-making purposes?

Back 27

Relevance

Front 28

Duggan, Inc. is the only company in its industry to depreciate its plant assets on a straight-line basis. Which qualitative characteristic of accounting information may not be followed?

Back 28

Comparability

Front 29

Roddick Company has attempted to determine the replacement cost of its inventory. Three different appraisers arrive at substantially different amounts for this value. The president, nevertheless, decides to report the middle value for external reporting purposes. Which qualitative characteristic of information is lacking in these data?

Back 29

Verifiability

Front 30

Qualitative characteristic being employed when companies in the same industry are using the same accounting principles.

Back 30

Comparability

Front 31

Quality of information that confirms users’ earlier expectations.

Back 31

Confirmatory Value

Front 32

Imperative for providing comparisons of a company from period to period.

Back 32

Consistency

Front 33

Ignores the economic consequences of a standard or rule.

Back 33

Neutrality

Front 34

Requires a high degree of consensus among individuals on a given measurement.

Back 34

Verifiability

Front 35

Predictive value is an ingredient of this fundamental quality of information.

Back 35

Relevance

Front 36

Four qualitative characteristics that are related to both relevance and faithful representation.

Back 36

Comaparability, Verifiability, Timeliness, And Understability

Front 37

An item is not recorded because its effect on income would not change a decision.

Back 37

Materiality

Front 38

Neutrality is an ingredient of this fundamental quality of accounting information.

Back 38

Faithful Representation

Front 39

Two fundamental qualities that make accounting information useful for decision-making purposes.

Back 39

Relevance and Faithful Representation

Front 40

Issuance of interim reports is an example of what enhancing quality of relevance?

Back 40

Timeliness

Front 41

Arises from peripheral or incidental transactions.

Back 41

Gains, Loses

Front 42

Obligation to transfer resources arising from a past transaction.

Back 42

Liabilities

Front 43

Increases ownership interest.

Back 43

Investments by Owners, Comprehensive Income

Front 44

Declares and pays cash dividends to owners.

Back 44

Distributions to Owners

Front 45

Increases in net assets in a period from nonowner sources.

Back 45

Comprehensive Income

Front 46

Items characterized by service potential or future economic benefit.

Back 46

Assets

Front 47

Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners.

Back 47

Comprehensive Income

Front 48

Allocates expenses to revenues in the proper period.

Back 48

Expense Recognition Principle

Front 49

Indicates that fair value changes subsequent to purchase are not recorded in the accounts.

Back 49

Measurement Principle(Historical Cost)

Front 50

Ensures that all relevant financial information is reported.

Back 50

Full Disclosure Principle

Front 51

Rationale why plant assets are not reported at liquidation value.

Back 51

Going Concern Assumption

Front 52

Indicates that personal and business record keeping should be separately maintained.

Back 52

Economic Entity Assumption

Front 53

Separates financial information into time periods for reporting purposes.

Back 53

Periodicity Assumption

Front 54

Assumes that the dollar is the “measuring stick” used to report on financial performance.

Back 54

Monetary Unit Assumption

Front 55

Fair value changes are not recognized in the accounting records.

Back 55

Measurement Principle( Historical Cost)

Front 56

Financial information is presented so that investors will not be misled.

Back 56

Full Disclosure Principle

Front 57

Intangible assets are capitalized and amortized over periods benefited.

Back 57

Expense Recognition Principle

Front 58

Agricultural companies use fair value for purposes of valuing crops.

Back 58

Measurement Principle (Fair Value)

Front 59

Each enterprise is kept as a unit distinct from its owner or owners.

Back 59

Economic Entity Assumption

Front 60

All significant post-balance-sheet events are reported.

Back 60

Full Disclosure Principle

Front 61

Revenue is recorded at point of sale.

Back 61

Revenue Recognition Principle

Front 62

All important aspects of bond indentures are presented in financial statements.

Back 62

Full Disclosure Principle

Front 63

Rationale for accrual accounting.

Back 63

Expense recognition and revenue recognition Principles