What is the concept of going concern? elect one answer: Understating the assets and revenues and overstating the liabilities and expenses O Including all expenses for the year, irrespective of the date on which they were paid O Using caution when making estimates in conditions of uncertainty A company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary

What is the concept of going concern? elect one answer: Understating the assets and revenues and overstating the liabilities and expenses O Including all expenses for the year, irrespective of the date on which they were paid O Using caution when making estimates in conditions of uncertainty A company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 24GI

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Match the correct term with its definition. A. cost principle i. if uncertainty in a potential financial estimate, a company should err on the side of caution and report the most conservative amount B. full disclosure principle ii. also known as the historical cost principle, states that everything the company owns or controls (assets) must be recorded at their value at the date of acquisition C. separate iii. (also referred to as the matching principle) matches expenses with associated revenues in the period in which the revenues were generated. D. monetary iv. business must report any business activities that could affect what is reported on the financial statements E. conservatism v. system of using a monetary unit by which to value the transaction, such as the US dollar. F. revenue vi. period of time in which you performed the service or gave the customer the product is the period in which revenue is recognized. G. expense vii. business may only report activities on financial statements that are specifically related to company operations, not those activities that affect the owner personally.
A change in the expected service life of an asset arising because additional information has been obtained is: a. an accounting change that should be reported by restating the financial statements of all prior periods represented b. an accounting change that should be reported in the period of change and future periods if the change affects both c. a correction of an error d. not an accounting change
Match the correct term with its definition.A. Cost principlei. if uncertainty in a potential financial estimate, a company should err on the side ofcaution and report the most conservative amount B. Full disclosureprinciple ii. also known as the historical cost principle, states that everything the company ownsor controls (assets) must be recorded at their value at the date of acquisition C. Separateentity concept iii. (also referred to as the matching principle) matches expenses with associatedrevenues in the period in which the revenues were generated D. Monetarymeasurementconcept iv. business must report any business activities that could affect what is reported onthe financial statements E. Conservatismv. system of using a monetary unit by which to value the transaction, such as the USdollar F. Revenuerecognitionprinciple vi. period of time in which you performed the service or gave the customer theproduct is the period in which revenue is recognized G. Expenserecognitionprinciple…
A change in accounting estimate is An adjustment of the carrying amount of an asset or liability, or related expense, resulting from reassessing the expected future benefits and obligations associated with that asset or liability. A change in the specific principles, bases, conventions, rules and practices applied b an entity in preparing and presenting financial statements. Omission from, and misstatement in an entity's financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that was available and could reasonably be expected to have been obtained and taken into account in preparing those statements. All of the above.
Which of the following is an assumption made in the preparation of the financial statements? Select one: a. The current market value is assumed to be less relevant than the original cost paid. b. Financial statements are prepared for a specific entity that is distinct from the entity's owners. c. The preparation of financial statements for a specific time period assumes that the balance sheet covers a designated period of time. d. Financial statements are prepared assuming that inflation
If the income statement error is discovered in a subsequent accounting period, what action is to be done by the entity? Group of answer choices a. Reclassify the item to its proper nominal account and restate the income statement of the prior year affected by the error. b. Restate the income statement of the prior year affected by the error. c. No reclassifying entry is necessary but restate the income statement of the prior year affected by the error. d. Reclassify the item to its proper nominal account. Recording of next year's sales as sales of the current year will Group of answer choices a. overstate net income of next year b. not affect retained earnings at the end of next year c. understate retained earnings at the end of the current year d. understate net income of the current year
Indicate with the appropriate letter the nature of each situation described below: Type of Change PR PP E Change in principle reported retrospectively Change in principle reported prospectively Change in estimate Change in estimate resulting from a change in principle Change in reporting entity EP R N Not an accounting change Situation 1. Change from declining balance depreciation to straight-line. 2. Change in the estimated useful life of office equipment. 3. Technological advance that renders worthless a patent with an unamortized cost of $45,000. 4. Change from determining lower of cost or net realizable value (LCNRV) for the inventories by the individual item approach to the aggregate approach. 5. Change from LIFO inventory costing to the weighted-average inventory costing. 6. Settling a lawsuit for less than the amount accrued previously as a loss contingency. 7. Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately…
Match the following situations or statements with the correct assumption or principle. Financial Statements must be prepared at defined equal time intervals A company is assumed to continue its activity in order to fulfill objectives and commitments All important financial information must be reported or revealed. The value of an asset will be kept unchanged regardless of changes in the assets fair value. Expenses are recorded in the same period when they help generate revenues. Choose... Choose... Going concern assumption Periodicity assumption Expense recognition principle Historical cost principle Full disclosure principle Choose... Choose... =
Which of the following statements is (are) true, concerning the Going Concern assumption? When preparing financial statements, management is required to make an assessment of an enterprise’s ability to continue as a going concern which should be at least twelve months from balance sheet date When an enterprise has a history of profitable operations and ready access to financial resources it is not a detailed analysis as to is ability to operate as a going concern is not necessary When the financial statements are not prepared on a going-concern basis, this fact should be disclosed I and II only II and III II and III only I, II, and III
What is the effect of omission of accrued income in assets at the end of the year of error? O NO effect O Overstated O Understated O Cannot be determined from the given information
Which one of the following statement about encumbrance is correct? a. Encumbrances are equivalent to expenditures and encumbrances outstanding at the end of a year should be reported as assets b. None of the options c. Encumbrances are equivalent to expenditures and encumbrances outstanding at the end of a year should be reported as liabilities d. Encumbrances are recorded at the estimated cost of goods ordered or services contracted for. The subsequent amount recognized as expenditures upon receipt of the goods and services may differ from the encumbered amount.
Prospective application of recognizing the effect of a change in an accounting estimate means A. correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occured B. recognizing the effect of the change in the accounting estimate in the current and future periods affected by the change C. applying a new accounting policy to transactions other events and conditions as if the policy had always been applied D. Any of the choices