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     61.     The assumption that a business enterprise will not be sold or liquidated in the near future is known as the
a.     economic entity assumption.
b.     monetary unit assumption.
c.     conservatism assumption.
d.     none of these.

     62.     Which of the following is an implication of the going concern assumption?
a.     The historical cost principle is credible.
b.     Depreciation and amortization policies are justifiable and appropriate.
c.     The current-noncurrent classification of assets and liabilities is justifiable and signify-cant.
d.     All of these.

     63.     Proponents of historical cost ordinarily maintain that in comparison with all other valuation alternatives for general purpose financial reporting, statements prepared using historical costs are more
a.     reliable.
b.     relevant.
c.     indicative of the entity's purchasing power.
d.     conservative.

     64.     Valuing assets at their liquidation values rather than their cost is inconsistent with the
a.     periodicity assumption.
b.     matching principle.
c.     materiality constraint.
d.     historical cost principle.

     65.     Revenue is generally recognized when realized or realizable and earned. This statement describes the
a.     consistency characteristic.
b.     matching principle.
c.     revenue recognition principle.
d.     relevance characteristic.

     66.     Generally, revenue from sales should be recognized at a point when
a.     management decides it is appropriate to do so.
b.     the product is available for sale to the ultimate consumer.
c.     the entire amount receivable has been collected from the customer and there remains no further warranty liability.
d.     none of these.

     67.     Revenue generally should be recognized
a.     at the end of production.
b.     at the time of cash collection.
c.     when realized.
d.     when realized or realizable and earned.

     68.     Which of the following is not a time when revenue may be recognized?
a.     At time of sale
b.     At receipt of cash
c.     During production
d.     All of these are possible times of revenue recognition.

     69.     Under Statement of Financial Accounting Concepts No. 5, which of the following, in the most precise sense, means the process of converting noncash resources and rights into cash or claims to cash?
a.     Recognition
b.     Measurement
c.     Realization
d.     Allocation

     70.     "When products (goods or services), merchandise, or other assets are exchanged for cash or claims to cash" is a definition of
a.     allocated.
b.     realized.
c.     realizable.
d.     earned.

     71.     The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts, is an application of the
a.     consistency characteristic.
b.     matching principle.
c.     materiality constraint.
d.     revenue recognition principle.

     72.     The accounting principle of matching is best demonstrated by
a.     not recognizing any expense unless some revenue is realized.
b.     associating effort (expense) with accomplishment (revenue).
c.     recognizing prepaid rent received as revenue.
d.     establishing an Appropriation for Contingencies account.

     73.     Which of the following serves as the justification for the periodic recording of depreciation expense?
a.     Association of efforts (expense) with accomplishments (revenue)
b.     Systematic and rational allocation of cost over the periods benefited
c.     Immediate recognition of an expense
d.     Minimization of income tax liability

     74.     Application of the full disclosure principle
a.     is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits.
b.     is violated when important financial information is buried in the notes to the financial statements.
c.     is demonstrated by the use of supplementary information presenting the effects of changing prices.
d.     requires that the financial statements be consistent and comparable.

     75.     Which of the following statements concerning the cost-benefit relationship is not true?
a.     Business reporting should exclude information outside of management's expertise.
b.     Management should not be required to report information that would significantly harm the company's competitive position.
c.     Management should not be required to provide forecasted financial information.
d.     If needed by financial statement users, management should gather information not included in the financial statements that      would not otherwise be gathered for internal use.

     76.     Under Statement of Financial Accounting Concepts No. 2, which of the following relates to both relevance and reliability?
a.     Cost-benefit constraint
b.     Predictive value
c.     Verifiability
d.     Representational faithfulness

     77.     Charging off the cost of a wastebasket with an estimated useful life of 10 years as an expense of the period when purchased is an example of the application of the
a.     consistency characteristic.
b.     matching principle.
c.     materiality constraint.
d.     historical cost principle.

     78.     Which of the following statements about materiality is not correct?
a.     An item must make a difference or it need not be disclosed.
b.     Materiality is a matter of relative size or importance.
c.     An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.
d.     All of these are correct statements about materiality.

     79.     Which of the following are considered pervasive constraints by Statement of Financial Accounting Concepts No. 2?
a.     Cost-benefit relationship and conservatism
b.     Timeliness and feedback value
c.     Conservatism and verifiability
d.     Materiality and cost-benefit relationship
     80.     The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favor of understating assets and revenues and overstating liabilities and expenses is known as the
a.     conservatism constraint.
b.     materiality constraint.
c.     substance over form principle.
d.     industry practices constraint.

     81.     Which of the following best illustrates the accounting concept of conservatism?
a.     Use of the allowance method to recognize bad debt losses from credit sales
b.     Use of the lower of cost or market approach in valuing inventories.
c.     Use of the same accounting method from one period to the next in computing depreciation expense
d.     Utilization of a policy of deliberate understatement of asset values in order to present a conservative net income figure

     82.     Trade-offs between the characteristics that make information useful may be necessary or beneficial. Issuance of interim financial statements is an example of a trade-off between
a.     relevance and reliability.
b.     reliability and periodicity.
c.     timeliness and materiality.
d.     understandability and timeliness.

     83.     Allowing firms to estimate rather than physically count inventory at interim (quarterly) periods is an example of a trade-off between
a.     verifiability and reliability.
b.     reliability and comparability.
c.     timeliness and verifiability.
d.     neutrality and consistency.

     P84.     In matters of doubt and great uncertainty, accounting issues should be resolved by choosing the alternative that has the least favorable effect on net income, assets, and owners' equity. This guidance comes from the
a.     materiality constraint.
b.     industry practices constraint.
c.     conservatism constraint.
d.     full disclosure principle.

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