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Unformatted text preview: ACCT 800 Practice Problem Solutions Question 1 Each of the following should be answered in grammatically correct, complete sentences. A. A liability is a probable future sacrifice of economic benefits arising from current obligations to transfer assets or provide services to another entity as a result of past transactions or events. B. The matching principle says to match revenues with the expenses incurred to generate those revenues in the same accounting period. It makes income more relevant and reliable. C. Revenue should be recognized when it is (1) earned and (2) realized or realizable. Question 2. A. Disagree. The Account Receivable does not meet the definition of an asset, a probable future economic benefit, obtained or controlled by an organization as a result of a past transaction or event. The receivable is not obtained or controlled. The Stock Option Liability does not meet the definition of a liability, a probable future sacrifice of economic resources arising from current obligations to transfer assets or provide services to another entity as a...
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This note was uploaded on 09/20/2011 for the course ACCT 301 taught by Professor Staff during the Spring '11 term at S.F. State.
- Spring '11
- Financial Accounting