304 Chapter 11 - Exercises for Lesson 1-Section 1 Multiple...

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Exercises for Lesson 1 ------------------------- Section 1. Multiple Choice Questions 1. The information provided by financial reporting pertains to a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. c. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers. d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries. 2. An effective capital allocation process 3. Companies that are listed on a stock exchange are required to submit their financial statements to the 4. Compared to the accrual basis of accounting, the cash basis of accounting overstates income by the net increase during the accounting period of the Accounts Accrued Receivable Expenses Payable ——————— ————————— 5. The following information is available concerning the accounts of Franz Company: Accounts payable, January 1, 2004 $18,000 Cash payments on account during 2004 75,000 Purchase discounts taken during 2004 on 2004 purchases 1,200 Accounts payable, December 31, 2004 10,000 Assuming the company records purchases at the gross amounts, the 1
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total purchases for 2004 would be a. $82,200. b. $65,800. c. $68,200. d. $67,000. ------------------------- Sectin 2. Excercises 6- The Financial Accounting Standards Board was established because many groups interested in financial reporting believed that the Accounting Principles Board was not effective. Discuss the apparent advantages that the FASB should have over its earlier counterpart, the APB. 7. State the accounting assumption, principle, information character- istic, or constraint that is most applicable in the following cases. (1). All payments less than $25 are expensed as incurred. (Do not use conservatism.) ________________________________ (2). The company employs the same inventory valuation method from period to period. ________________________________ (3). A patent is capitalized and amortized over the periods benefited. ________________________________ (4). Assuming that dollars today will buy as much as ten years ago. ________________________________ (5). Rent paid in advance is recorded as prepaid rent. ________________________________ (6). Financial statements are prepared each year. ________________________________ (7). All significant post-balance sheet events are reported. ________________________________ (8). Personal transactions of the proprietor are distinguished from business transactions. ________________________________ Section 3. Problems 8. Yates Company's records provide the following information concerning certain account balances and changes in these account balances dur- ing the current year. Transaction information is missing from each 2
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