MULTIPLE CHOICE QUESTION:
1. What are the Statements of Financial Accounting Concepts intended to establish?
a. Generally accepted accounting principles in financial reporting by business enterprises.
b. The meaning of “Present fairly in accordance with generally accepted accounting principles.”
c. The objectives and concepts for use in developing standards of financial accounting and reporting.
d. The hierarchy of sources of generally accepted accounting principles.
2. Identify which basic assumption of accounting is best described in each item below.
a. The economic activities of KC Corporation are divided into 12-month periods for the purpose of issuing annual reports.
b. Solectron Corporation, Inc. does not adjust amounts in its financial statements for the effects of inflation.
c. Walgreen Co. reports current and noncurrent classifications in its balance sheet.
d. The economic activities of General Electric and its subsidiaries are merged for accounting and reporting purposes.
3. Identify which basic principle of accounting is best described in each item below.
a. KC Corporation reports revenue in its income statement when it is earned instead of when the cash is collected.
b. Yahoo, Inc. recognizes depreciation expense for a machine over the 2-year period during which that machine helps the company earn revenue.
c. Oracle Corporation reports information about pending lawsuits in the notes to its financial statements.
d. Eastman Kodak Company reports land on its balance sheet at the amount paid to acquire it, even though the estimated fair market value is greater.