21.The terms calculationand measurementboth refer to the valuation of a real phenomena or attribute. 22.Calculations attempt to simulate or come as close as possible to the measurement of real phenomena or attributes. Accounting Theory: 8 th edition Page 2 of 11
Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY 23.FIFO and LIFO measures of cost of goods sold and inventories are examples of calculations rather than measurements. 24.There are often trade-offs between objectivity and the usefulness of numbers generated by the measurement process. 25.Measurement is an integral part of accounting theory. 26.Throughout the financial history of the United States, current value has been the accepted valuation system for published financial statements. 27.The discounted cash flow approach can be used to determine an objective measurement for most assets and liabilities. 28.A general price-level adjustment refers to the purchasing power of the monetary unitary unit relative to all goods and services in the economy. 29.Both exit value and replacement cost are valuation systems that fall into the current value category. 30.The principal argument used to justify the replacement cost system over exit values is that if the great majority of the firm's assets were not already owned, it would be economically justifiable toacquire them. MULTIPLE CHOICE QUESTIONS 1.Which of the following methods of valuing an asset is based on the amount that a firm could acquire by selling the asset? Accounting Theory: 8 th edition Page 3 of 11
Chapter 1—AN INTRODUCTION TO ACCOUNTING THEORY 2.Which of the following methods of valuing an asset is based on the amount that would be paid for it in markets where the asset would ordinarily be acquired? 3.Which of the following would be considered a political factor relative to the financial accounting policy function? a.Auditorsb.Inflationc.Taxesd.Price changesANSWER:A 4.Which of the following groups carry out most accounting research? 5.If a number assigned to an object is an actual measurement of a property of the object, it is referred to as a(n):
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