Homework LO: 1.2
To be useful, information must have which of the following fundamental qualitative characteristics?
Relevance and faithful representation
Identify the accounting concept, assumption, or principle that best applies to each of the following situations: c. Inflation has been around 5.5% for some time. Woodlake Realtors is considering measuring its land values in inflation-adjusted amounts.
Stable-monetary-unit assumption
Which of the following is a true statement about International Financial Reporting Standards?
They are converging gradually with U.S. standards
Accounting is moving in the direction of reporting more and more assets and liabilities at their fair values.
True
Another name for the continuity assumption is the going−concern assumption.
True
Assume that a business is headed for certain bankruptcy and it is evident that its liabilities greatly exceed its assets. Which principle would be violated if its financial statements were prepared using standard U.S. GAAP?
continuity assumption
Relevance is one of the four enhancing qualitative characteristics.
false
Assets are usually reported at their
historical cost
Anchor Enterprises buys a warehouse for $520,000 to use for its East Coast distribution operations. On the date of thepurchase, a professional appraisal shows a value of $610,000 for the warehouse. The seller had originally purchased the building for $490,000. Anchor has a similar warehouse on the West Coast that has a book value of $532,000. Under the historical costprinciple, Anchor should record the building for
$520,000
Fallon Osmond is chairperson of the board of Simple Treats, Inc. Suppose Osmond has just founded Simple Treats, and assume that she considers her home and other personal assets as part of Simple Treats. Answer these questions about the evaluation of Simple Treats, Inc. 1. Which accounting assumption governs this situation? 2. Application of ________ will _______. This will help Osmond, investors, and lenders ________, and this knowledge will help all parties evaluate the business realistically.
1. entity assumption 2. entity assumption- separate Osmond's personal assets from the assets of Simple Treats- know how much assets, liabilities and equity the business has
Identify the accounting concept, assumption, or principle that best applies to each of the following situations: b. General Motors wants to determine which division of the company —Chevrolet or GMC— is more profitable
Entity Assumption
Generally accepted accounting principles (GAAP) are the accounting guidelines formulated by the Securities and Exchange Commission
False
The SEC establishes International Financial Reporting Standards.
False
The fundamental qualitative characteristics of accounting information are relevance and reliability.
False
The historical cost principle is not used widely in the United States to value assets.
False
Identify the accounting concept, assumption, or principle that best applies to each of the following situations: a. Burger King, the restaurant chain, sold a store location to McDonald's. How can Burger King determine the sale price of the store —by a professional appraisal, Burger King original cost, or the amount actually received from the sale?
Historical Cost Principle
Identify the accounting concept, assumption, or principle that best applies to each of the following situations: d. You get an especially good buy on a laptop, paying only $300 when it normally costs $800. What is your accounting value for this laptop?
Historical cost principle
