Unit 6 Assignment Capstone

Unit 6 [AC499: Bachelor’s Capstone in Accounting]

Unit 6 Assignment: GAAP Applications – Conceptual Framework of Accounting Assignment:

The Conceptual Framework (CF) allows for the systematic adaptation of accounting standards to a changing

business environment. FASB uses the CF to aid in an organized and consistent development of new

accounting standards. The CF outlines the objectives of financial reporting and the qualities of good accounting

information, precisely defines commonly used terms such as asset and revenue, and provides guidance about

appropriate recognition, measurement, and reporting. Understanding the terminology associated with the

framework is imperative.

Submission Instructions:

Select the best answer for each of the following questions and fill out and the Answer Sheet. Submit only the

Answer Sheet to the Unit 6 Dropbox by the end of the unit.

Question # 1 - Accruing net losses on non-cancelable purchase commitments for inventory is an

example of the accounting concept of:

a. Conservatism

b. Realization

c. Consistency

d. Materiality

Question # 2 - The information provided by financial reporting pertains to:

a. Individual companies, rather than to industries or the economy as a whole or to consumers.

b. Individual companies and industries, rather than to the economy as a whole or to consumers.

c. Individual companies and the economy as a whole, rather than to industries or to consumers.

d. Individual companies, industries, and the economy as a whole, rather than to consumers.

Question # 3 - According to Statement of Financial Accounting Concepts No. 2, an interim earnings

report is expected to have which of the following?

Predictive Feedback

value value

a. No No

b. Yes Yes

c. Yes No

d. No Yes

Unit 6 [AC499: Bachelor’s Capstone in Accounting]

Question # 4 - A patent purchased in 2007 and being amortized over a 10 years was determined to

be worthless in 2010. The write-off of the asset in 2010 is an example of which of the following

principles?

a. Associating cause and effect

b. Immediate recognition

c. Systematic and rational allocation

d. Objectivity

Question # 5 - An accrued expense is an expense:

a. Incurred but not paid

b. Incurred and paid

c. Paid but not incurred

d. Not reasonably estimable

Question # 6 - Which of the following accounting concepts states that an accounting transaction

should be supported by sufficient evidence to allow two or more qualified individuals to arrive at

essentially similar measures and conclusions?

a. Matching

b. Verifiability

c. Periodicity

d. Stable monetary unit

Question # 7 - Which of the following is considered a pervasive constraint by Statement of Financial

Accounting Concepts No. 2?

a. Benefits/costs

b. Conservatism

c. Timeliness

d. Verifiability

Question # 8 - The valuation of a promise to receive cash in the future at present value on the

financial statements of a company is valid because of the accounting concept of:

a. Entity

b. Materiality

c. Going concern

d. Neutrality

Unit 6 [AC499: Bachelor’s Capstone in Accounting]

Question # 9 - Under Statement of Financial Accounting Concepts (SFAC) No. 2, which of the

following relates to both relevance and reliability?

a. Timeliness

b. Neutrality

c. Feedback value

d. Consistency

Question # 10 - Under SFAC No. 6, which of the following, in the most precise sense, means the

process of converting noncash resources and rights into cash or claims to cash?

a. Allocation

b. Recordation

c. Recognition

d. Realization

Question # 11 - FASB concluded that the most general objective of financial reporting is to:

a. provide information useful in the decisions made by external users

b. meet the needs of internal users

c. provide information about an entity's earnings

d. provide information about an entity's cash flows

Question # 12 - Which qualitative characteristic is an ingredient of relevance?

a. verifiability

b. timeliness

c. neutrality

d. representational faithfulness

Question # 13 - According to the FASB hierarchy of qualitative characteristics, the two primary

qualities making accounting information useful are:

a. understandability and decision usefulness

b. relevance and reliability

c. verifiability and neutrality

d. predictive value and feedback value

Question # 14 - Which qualitative characteristic is an ingredient of reliability?

a. predictive value

b. feedback value

c. timeliness

d. neutrality

Unit 6 [AC499: Bachelor’s Capstone in Accounting]

Question # 15 - Representational Faithfulness is a relationship between the reported accounting

measurements or descriptions and the economic resources, obligations, and the transactions and

events causing changes in these items. This is important because the:

a. bias associated with financial measurements can be reduced.

b. validity of accounting data is an important economic resource.

c. accounting information is relevant for all decisions.

d. financial information is faithfully reported in the accounting records.

Question # 16 - Which of the following are considered secondary characteristics of accounting

information?

a. verifiability and feedback value

b. predictive value and timeliness

c. comparability and consistency

d. representational faithfulness and neutrality

Question # 17 - Which of the following items would be a violation of materiality?

a. a company did not separately report an unusual gain of $50,000. Its income from operations was

$5,000,000

b. a company expensed the purchase of pencil sharpeners that have an estimated useful life of three

years

c. $25,000 illegal bribe to a foreign official was not separately disclosed in the annual report

d. a $5,000 expenditure to improve a building that originally cost $5,000,000 was expensed

Question # 18 - Revenue may be recognized by an entity at the completion of production during an

accounting period:

a. only if full payment was received from the buyer before production began

b. when no specific point of sale can be identified

c. when there is a fixed selling price, and there are no limitations on the amount that can be sold

d. when collectability is highly uncertain

Question # 19 - Which one of the following assumptions or principles most logically supports the

preparation of a single set of consolidated financial statements that combine the financial information

of several wholly-owned but separately-identifiable businesses?

a. historical cost

b. industry practices

c. entity

d. materiality

Unit 6 [AC499: Bachelor’s Capstone in Accounting]

Question # 20 - The principle of revenue recognition results in:

a. recording revenue in the income statement.

b. recording realized revenue when it is earned.

c. measuring relevant and reliable information whenever a transaction has occurred.

d. assuring the existence of all amounts recorded as net income.

Unit 6 [AC499: Bachelor’s Capstone in Accounting]

Unit 6 Assignment Grading Rubric:

Unit 6 Assignment Rubric:

Points

Possible

Your

Points

Comments as

needed

Question # 1 – Conceptual Framework Principle 2

Question # 2 – Reporting & Conceptual Framework 2

Question # 3 – SFACs 2

Question # 4 - Conceptual Framework Principle 2

Question # 5– Identification of Concepts 2

Question # 6 – Transactions & the Framework 2

Question # 7 – SFACs 2

Question # 8 - Conceptual Framework Principle 2

Question # 9 - Conceptual Framework Principle 2

Question # 10 - Conceptual Framework Principle 2

Question # 11 – Financial Reports & Framework 2

Question # 12 – Characteristics / Report Relevance 2

Question # 13 – Report Qualitative Characteristics 2

Question # 14 - Conceptual Framework Principle 2

Question # 15– Determine importance of principles 2

Question # 16 – Determine importance of principles 2

Question # 17 – Examine importance of Materiality 2

Question # 18 – Revenue Recognition Principles 2

Question # 19 - Conceptual Framework Principle 2

Question # 20 - Revenue Recognition Principles 2

Any Deductions (Format incorrect or Late Penalty) -

Total Points 40