ACC 303 homework chapter 2

(a)

Quality of information that permits users to identify similarities in and differences between two sets of economic phenomena.

(b)

Having information available to users before it loses its capacity to influence decisions.

(c)

Information about an economic phenomenon that has value as an input to the processes used by capital providers to form their own expectations about the future.

(d)

Information that is capable of making a difference in the decisions of users in their capacity as capital providers.

(e)

Absence of bias intended to attain a predetermined result or to induce a particular behavior.

(1)

It purchased 1,000 shares of Sastre Company, a start-up company. Vande Velde made the investment based on valuation estimates from an internally developed model.

(2)

It purchased 2,000 shares of GE stock, which trades on the NYSE.

(3)

It invested $10,000 in local development authority bonds. Although these bonds do not trade on an active market, their value closely tracks movements in U.S. Treasury bonds.

(a)

Legal fees paid in connection with the purchase of land are $1,500.

(b)

Eduardo, Inc. paves the driveway leading to the office building at a cost of $21,000.

(c)

A meat market purchases a meat-grinding machine at a cost of $3,500.

(d)

On June 30, Monroe and Meno, medical doctors, pay 6 months’ office rent to cover the month of July and the next 5 months.

(e)

Smith’s Hardware Company pays $9,000 in wages to laborers for construction on a building to be used in the business.

(f)

Alvarez’s Florists pays wages of $2,100 for the month an employee who serves as driver of their delivery truck.

(a)

Accounting rule-making that relies on a body of concepts will result in useful and consistent pronouncements.

(b)

General-purpose financial reports are most useful to company insiders in making strategic business decisions.

(c)

Accounting standards based on individual conceptual frameworks generally will result in consistent and comparable accounting reports.

(d)

Capital providers are the only users who benefit from general-purpose financial reporting.

(e)

Accounting reports should be developed so that users without knowledge of economics and business can become informed about the financial results of a company.

(f)

The objective of financial reporting is the foundation from which the other aspects of the framework logically result.

(a)

The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability.

(b)

Relevant information only has predictive value, confirmatory value, or both.

(c)

Information that is a faithful representation is characterized as having predictive or confirmatory value.

(d)

Comparability pertains only to the reporting of information in a similar manner for different companies.

(e)

Verifiability is solely an enhancing characteristic for faithful representation.

(f)

In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities.

(a)

Qualitative characteristic being employed when companies in the same industry are using the same accounting principles.

(b)

Quality of information that confirms users’ earlier expectations.

(c)

Imperative for providing comparisons of a company from period to period.

(d)

Ignores the economic consequences of a standard or rule.

(e)

Requires a high degree of consensus among individuals on a given measurement.

(f)

Predictive value is an ingredient of this fundamental quality of information.

(g)

Four qualitative characteristics that are related to both relevance and faithful representation.

(h)

An item is not recorded because its effect on income would not change a decision.

(i)

Neutrality is an ingredient of this fundamental quality of accounting information.

(j)

Two fundamental qualities that make accounting information useful for decision-making purposes.

(k)

Issuance of interim reports is an example of what enhancing quality of relevance?

(a)

Fair value changes are not recognized in the accounting records.

(b)

Financial information is presented so that investors will not be misled.

(c)

Intangible assets are capitalized and amortized over periods benefited.

(d)

Agricultural companies use fair value for purposes of valuing crops.

(e)

Each enterprise is kept as a unit distinct from its owner or owners.

(f)

All significant post-balance-sheet events are reported.

(g)

Revenue is recorded at point of sale.

(h)

All important aspects of bond indentures are presented in financial statements.

(i)

Rationale for accrual accounting.

(j)

The use of consolidated statements is justified.

(k)

Reporting must be done at defined time intervals.

(l)

An allowance for doubtful accounts is established.

(m)

Goodwill is recorded only at time of purchase.

(n)

A company charges its sales commission costs to expense.

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The IASB conceptual framework does not identify the element comprehensive income.

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The existing IASB and FASB conceptual frameworks are organized in similar ways.

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The FASB and IASB agree that the objective of financial reporting is to provide useful information to investors and creditors.

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IFRS does not allow use of fair value as a measurement basis.

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The monetary unit assumption is used under IFRS.

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Under IFRS, companies may use fair value for property, plant, and equipment.

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The FASB and IASB are working on a joint conceptual framework project.

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Under IFRS, there are the same number of financial statement elements as in GAAP.

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must report all their assets on the statement of financial position (balance sheet) at fair value.

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may report property, plant, and equipment and natural resources at fair value.

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may refer to a concept statement on estimating fair values when market data are not available.

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may only use historical cost as the measurement basis in financial reporting.

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should the characteristic of relevance be traded-off in favor of information that is verifiable?

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should a single measurement method such as historical cost be used?

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should the common framework lead to standards that are principles-based or rules-based?

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should the role of financial reporting focus on internal decision-making as well as providing information to assist users in decision-making?

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work is being conducted on the framework as a whole, and it will not be issued until all parts are completed.

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work on the framework has a higher priority than projects on revenue and leases.

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work is being conducted on the framework in phases, and completed parts will be issued as completed.

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the framework will not address measurement issues.