According to the FASB conceptual framework, which of the following statements conforms to the realization concept?
a. Depreciated equipment was sold in exchange for a note receivable.
b. Cash was collected on accounts receivable.
c. Equipment depreciation
a. Depreciated equipment was sold in exchange for a note receivable.
Realization is the conversion of an item or service into cash or a claim to cash as would be the case when equipment is sold for a note receivable. Realization occurs at the time that an
Regarding a company's reporting of assets on the balance sheet, which of the following statements is correct?
a. Acquisition of the asset must be at least probable.
b. The removal of any outside restriction on the use of the asset must be at least probabl
d. Highly valuable resources which provide benefits to the company may not be reported on the balance sheet.
An asset is an economic resource that is within the control of the company, will provide future benefits, generally in the form of positive future
Which of the following is not an objective of financial reporting:
a. To report changes in economic resources and claims against those resources resulting from transactions, events, or circumstances that are not directly related to the entity's financial
d. To provide information about the fair value of an entity's economic resources.
The objectives of financial reporting include providing information that is useful to investors and creditors, providing information about an entity's resources and claims a
The fair value for an asset or liability is defined as
a. The cost of the asset less any accumulated depreciation or the carrying value of the liability on the date of the sale
b. The price that would be paid to acquire the asset or received to assume the
d. The price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants
Fair value is the exit price of an asset or liability, which is the amount that would be received when di
Which of the following is a generally accepted accounting principle that illustrates the practice of conservatism during a particular reporting period?
a. Capitalization of research and development costs
b. Accrual of a contingency deemed to be reasonably
c. Reporting inventory at the lower of cost or market value
Reporting inventory at the lower of cost or market value illustrates the practice of conservativism because the reporting entity chooses the accounting treatment, from two or more valid alternati
According to the FASB conceptual framework, for financial reporting to be useful, it must
a. Provide information useful for making business and investment decisions.
b. Be understandable to those who have a limited knowledge of business activities.
c. Dir
a. Provide information useful for making business and investment decisions.
In the context of the FASB Conceptual Framework information is useful if it provides information that is helpful in the making of business and investment decisions in relation to
Which of the following is incorrect regarding fair value measurement?
a. It is assumed that a transaction will occur int he principal market in which the asset or liability would most frequently be traded.
b. When there is no principal market, values are
b. When there is no principal market, values are based on the assumption that a transaction would occur in the least advantageous market.
Fair value measurement are not intended to be an application of conservatism. Assets, other than financial assets, ar
Crossroads Co. chooses to report a financial asset at its fair value. The asset trades in two different markets; however, neither market is the principal market for the financial asset. In the first market, sales proceeds are $76, which is net of transact
a. $81
When no principal market exists for a financial asset, the measurement of its fair value is based on the assumption that a transaction would occur in the most advantageous market for the asset.
The most advantageous market maximizes the amount that