Which of the following best illustrates the accounting concept of conservatism?
Use of the allowance method to recognize bad debt losses from credit sales
Use of the lower of cost or market approach in valuing inventories
Use of the same accounting method from one period to the next in computing depreciation expense
Utilization of a policy of deliberate understatement of asset values in order to present a conservative net income figure 4.
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 relevance and reliability.
reliability and periodicity. timeliness and materiality.
understandability and timeliness. 5.
Allowing firms to estimate rather than physically count inventory at interim (quarterly) periods is an example of a trade-off between verifiability and reliability.
reliability and comparability.
timeliness and verifiability neutrality and consistency.
A prepaid expense can best be described as an amount paid and currently matched with revenues.
paid and not currently matched with revenues.
not paid and currently matched with revenues. not paid and not currently matched with revenues. 7.
An accrued revenue can best be described as an amount collected and currently matched with expenses.
collected and not currently matched with expenses.
not collected and currently matched with expenses. not collected and not currently matched with expenses. 11.
Which of the following is a change in accounting principle? A change in the estimated service life of machinery
A change from FIFO to LIFO
A change from straight-line to double-declining-balance A change from FIFO to LIFO and a change from straight-line to double-declining- balance 12.
Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?
The gain or loss on disposal should be reported as an extraordinary item.
Results of operations of a discontinued component should be disclosed immediately below extraordinary items.
Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement.
The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.
If plant assets of a manufacturing company are sold at a gain of $820,000 less related taxes of $250,000, and the gain is not considered unusual or infrequent, the income statement for the period would disclose these effects as
a gain of $820,000 and an increase in income tax expense of $250,000.
operating income net of applicable taxes, $570,000.
a prior period adjustment net of applicable taxes, $570,000.
an extraordinary item net of applicable taxes, $570,000.
Fleming Company has the following items: write-down of inventories, $240,000; loss on disposal of Sports Division, $370,000; and loss due to an expropriation, $226,000. Ignoring income taxes, what total amount should Fleming Company report as extraordinary losses?