ACCT 2110-Chapter 1 and 2 Concepts

Which of the following organizations is primarily responsible for establishing GAAP in the United States. A. Financial Accounting Standards Board (FASB) B. International Accounting Standards Board (IASB) C. International Revenue Service (IRS) D. Securities Exchange Commission (SEC)

A. Financial Accounting Standards Board (FASB)

Which of the following underlying assumptions for conceptual framework is the reason the dollar is used in the preparation of financial statements. A. Monetary Unit B. Continuity C. Economic Entity D. Time Period

A. Monetary Unit

Homevestors purchased land for $400,000 in 2007. In 2019, an independent appraiser assessed the value of the land at 900,00. At what amount should land be recorded on the company's 2019 financial statement. A. at its cost of 400,000 B. at $500,000 the difference between the land's cost and assessed value C. Whichever amount the company considers to be the best indicator of the land's true value D. at its 900,000 appraised value

A. at its cost of 400,000

Which of the following is an assumption made in the preparation of the financial statement? A. The current market value is assumed to be more relevant than the original cost paid B. Financial Statements are prepared for a specific entity that is distinct from the entity of the owners C. Financial Statements are prepared assuming that inflation has a distinct effect on the monetary unit D. The preparation of Financial Statements for a specific time period assumes that the balance sheet covers a designated period of time

B. Financial Statements are prepared for a specific entity that is distinct from the entity of the owners

Which of the Following statements is true concerning assets? A. Assets are measured using a time-period approach B. Assets are initially recorded at market value, since historical cost tends to be too arbitrary. C. Assets are initially recorded using the historical cost principle D. Assets are initially recorded at market value and then adjusted to inflation

C. Assets are initially recorded using the historical cost principle

The purchase of office equipment on credit has what effect on the accounting equation. A. Liabilities increase and stockholders equity decreases B. Assets and stockholders' equity decrease C. Assets and liabilities decrease D. Assets and liabilities increase

D. Assets and liabilities increase

An Accountant is uncertain about the best estimate of an amount for a business transaction. If there are two possible amounts that could be recorded , the amount least likely to overstate assets and earnings is selected. Which of the following qualities is characterized by this action? A. Materiality B. Neutrality C. Comparability D. Conservatism

D. Conservatism

T/F A chart of accounts is prepared to determine whether the books have gotten out of balance.

False

T/F According to the historical cost principle, assets are always carried at their current market value

False

T/F GAAP has established a universal chart of accounts that is applicable to all businesses in the United States.

False

T/F The period assumption assumes that a company prepares its financial statements every month

False

T/F Under the double-entry system of accounting, a debit is always a negative entry

False

T/F The payment of a dividend increases both cash and stockholders' equity of the distributing entity.

False, a payment of a dividend is a loss of cash, meaning you gain nothing

T/F Income statement accounts have normal credit balances

True