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Homework answers / question archive / Mindanao State University - General Santos COURSE TITLE - ACCTG 001 PROBLEM 4: FOR CLASSROOM DISCUSSION Authoritative status 1)The conceptual framework (choose the incorrect statement) Is not a PFRS

Mindanao State University - General Santos COURSE TITLE - ACCTG 001 PROBLEM 4: FOR CLASSROOM DISCUSSION Authoritative status 1)The conceptual framework (choose the incorrect statement) Is not a PFRS

Accounting

Mindanao State University - General Santos

COURSE TITLE - ACCTG 001

PROBLEM 4: FOR CLASSROOM DISCUSSION

Authoritative status

1)The conceptual framework (choose the incorrect statement)

    1. Is not a PFRS.
    2. In the absence of a standard, shall be considered by management when making its judgment in developing and applying an accounting policy that results in information that is relevant and reliable.
    3. Is concerned with general- purpose financial statements only.
    4. Prevails over the PFRs in cases of conflicts.

Primary users

  1. Which of the following statements best explains why the reporting entity’s management and government regulators are not considered primary users under the Conceptual Framework?
    1. These users are considered related parties, and hence do not make relevant decisions.

 

    1. These users have the ability to curtail the operations of the reporting entity and therefore have the ability to affect the entity’s going concern.
    2. These users have the power to demand information they need directly from the reporting entity.
    3. All of these.

Information on economic resources, clams, and changes

  1. Information about the reporting entity’s economic resources, claims against the reporting entity and the effects of transactions and other events and conditions that change those resources and claims is referred to in the Conceptual Framework as information about the
    1. Economic phenomena.
    2. Entity’s return.
    3. Financial performance.
    4. Prospects for future cash flows.

Materiality

  1. Entity A is making a materiality judgment. Entity A considers the size of the impact of an item to be material if it exceeds 5% of the total assets. What type of materiality assessment is this?
    1. Quantitative
    2. Qualitative
    3. Requirement of a standard
    4. Relevance

Qualitative characteristics

  1. Entity A deliberately overstated its liabilities from ? 1M to ?1.2M. What qualitative characteristic is violated?
    1. Relevance
    2. Faithful representation
    3. Timeliness
    4. Understandability

 

  1. Two primary users are using the financial information of Entity A. If User #1 concludes that Entity A’s sales has increased while User #2 conludes that it has decreased, Entity A’s financial information is not
    1. Relevant.
    2. Faithfully represented.
    3. Comparable.
    4. Verifiable.

Elements of Financial Statements

 

  1. Which of the following is not one of the potentials of resource to provide future economic benefits to an entity?
    1. Service potential, i.e., the resource can be used to provide services in the entity’s normal business activities.
    2. The resource can be converted into cash
    3. The resource has the ability to provide cost-savings to the entity.
    4. The resource causes more outflows of cash from the entity than inflows.

 

  1. Which of the following would not result to the recognition of liability?
    1. Receipt of the proceeds of a bank loan.
    2. Receipt of delivery of equipment purchased on credit.
    3. A future commitment becomes burdensome.
    4. Paying in advance the purchase price of inventories for future delivery.

 

  1. Entity A determined that an asset has ceased to provide future economic benefits. Accordingly, Entity A recognized immediately the carrying amount of asset as loss. What expense recognition principle did Entity A use?
    1. Systematic and rational allocation
    2. Immediate recognition
    3. Matching
    4. Impairment loss

Concepts of Capital and Capital maintenance

  1. Under this concept of capital maintenance, profit is earned if net assets increased during the period after excluding the effects of transactions with the owners.
    1. Financial capital maintenance
    2. Physical capital maintenance
    3. Repairs and maintenance
    4. Building maintenance

 

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