TEST BANK FOR
Financial Statement Analysis, International Edition, 12th Edition
CHAPTER 1—INTRODUCTION TO FINANCIAL REPORTING
MULTIPLE CHOICE
1. Charging off equipment that cost less than $20 would be an example of the application of:
a. going concern
b. cost
c. matching
d. materiality
e. realization
ANS: D
2. The going concern assumption:
a. is applicable to all financial statements
b. primarily involves periodic income measurement
c. allows for the statements to be prepared under generally accepted accounting
principles
d. requires that accounting procedures be the same from period to period
e. none of the answers are correct
ANS: C
1-1
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
,3. Understating assets and revenues is justified based on:
a. realization assumption
b. matching
c. consistency
d. realization
e. none of the answers are correct
ANS: E
4. The assumption that enables us to prepare periodic statements between the time that a
business commences operations and the time it goes out of business is:
a. time period
b. business entity
c. historical cost
d. transaction
e. none of the answers are correct
ANS: A
5. Valuing assets at their liquidation values is not consistent with:
a. conservatism
b. materiality
c. going concern
d. time period
e. none of the answers are correct
1-2
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, ANS: C
6. The business being separate and distinct from the owners is an integral part of the:
a. time period assumption
b. going concern assumption
c. business entity assumption
d. realization assumption
e. none of the answers are correct
ANS: C
7. The principle that assumes the reader of the financial statements is not interested in the
liquidation values is:
a. conservatism
b. matching
c. time period
d. realization
e. none of the answers are correct
ANS: E
8. An accounting period that ends when operations are at a low ebb is:
a. a calendar year
b. a fiscal year
c. the natural business year
d. an operating year
e. none of the answers are correct
1-3
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, ANS: C
9. The accounting principle that assumes that inflation will not take place or will be immaterial is:
a. monetary unit
b. historical cost
c. realization
d. going concern
e. none of the answers are correct
ANS: A
10. Valuing inventory at the lower of cost or market is an application of the:
a. time period assumption
b. realization principle
c. going concern principle
d. conservatism principle
e. none of the answers are correct
ANS: D
11. The realization principle leads accountants to usually recognize revenue at:
a. the end of production
b. during production
c. the receipt of cash
d. the point of sale
1-4
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Financial Statement Analysis, International Edition, 12th Edition
CHAPTER 1—INTRODUCTION TO FINANCIAL REPORTING
MULTIPLE CHOICE
1. Charging off equipment that cost less than $20 would be an example of the application of:
a. going concern
b. cost
c. matching
d. materiality
e. realization
ANS: D
2. The going concern assumption:
a. is applicable to all financial statements
b. primarily involves periodic income measurement
c. allows for the statements to be prepared under generally accepted accounting
principles
d. requires that accounting procedures be the same from period to period
e. none of the answers are correct
ANS: C
1-1
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
,3. Understating assets and revenues is justified based on:
a. realization assumption
b. matching
c. consistency
d. realization
e. none of the answers are correct
ANS: E
4. The assumption that enables us to prepare periodic statements between the time that a
business commences operations and the time it goes out of business is:
a. time period
b. business entity
c. historical cost
d. transaction
e. none of the answers are correct
ANS: A
5. Valuing assets at their liquidation values is not consistent with:
a. conservatism
b. materiality
c. going concern
d. time period
e. none of the answers are correct
1-2
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, ANS: C
6. The business being separate and distinct from the owners is an integral part of the:
a. time period assumption
b. going concern assumption
c. business entity assumption
d. realization assumption
e. none of the answers are correct
ANS: C
7. The principle that assumes the reader of the financial statements is not interested in the
liquidation values is:
a. conservatism
b. matching
c. time period
d. realization
e. none of the answers are correct
ANS: E
8. An accounting period that ends when operations are at a low ebb is:
a. a calendar year
b. a fiscal year
c. the natural business year
d. an operating year
e. none of the answers are correct
1-3
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, ANS: C
9. The accounting principle that assumes that inflation will not take place or will be immaterial is:
a. monetary unit
b. historical cost
c. realization
d. going concern
e. none of the answers are correct
ANS: A
10. Valuing inventory at the lower of cost or market is an application of the:
a. time period assumption
b. realization principle
c. going concern principle
d. conservatism principle
e. none of the answers are correct
ANS: D
11. The realization principle leads accountants to usually recognize revenue at:
a. the end of production
b. during production
c. the receipt of cash
d. the point of sale
1-4
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from
the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
