Reference no: EM131001969
Certain underlying considerations have had an important impact on the development of generally accepted accounting principles. Following is a list of these underlying considerations, as well as a list of statements describing them.
a. Going concern or continuity i. Industry practices
b. Monetary unit j. Verifiability
c. Conservatism k. Consistency
d. Matching l. Realization
e. Full disclosure m. Historical cost
f. Materiality n. Time period
g. Transaction approach o. Business entity
h. Accrual basis
1. The business for which the financial statements are prepared is separate and distinct from the owners.
2. The assumption is made that the entity will remain in business for an indefinite period of time.
3. Accountants need some standard of measure to bring financial transactions together in a mean- ingful way.
4. Revenue should be recognized when the earning process is virtually complete and the exchange value can be objectively determined.
5. This concept deals with when to recognize the costs that are associated with the recognized revenue.
6. Accounting reports must disclose all facts that may influence the judgment of an informed reader.
7. This concept involves the relative size and importance of an item to a firm.
8. The accountant is required to adhere as closely as possible to verifiable data.
9. Some companies use accounting reports that do not conform to the general theory that under- lies accounting.
10. The accountant records only events that affect the financial position of the entity and, at the same time, can be reasonably determined in monetary terms.
11. Revenue must be recognized when it is realized (realization concept), and expenses are recog- nized when incurred (matching concept).
12. The entity must give the same treatment to comparable transactions from period to period.
13. The measurement with the least favorable effect on net income and financial position in the current period must be selected.
14. Of the various values that could be used, this value has been selected because it is objective and determinable.
15. With this assumption, inaccuracies of accounting for the entity short of its complete life span are accepted.
Required: Place the appropriate letter identifying each quality on the line in front of the statement describing the quality.
|
Selected sections of the sarbanes-oxley act
: Establishment of Board-There is established the Public Company Accounting Oversight Board, to oversee the audit of public companies that are subject to the securities laws,
|
|
Accounting procedures are in the form of ritual
: Assume that accounting procedures are in the form of ritual. Does this imply that the accountant's product does not serve a useful function? Discuss.
|
|
Find the single premium
: If death occurs in the second year, insured will receive at time 2 only a return of the single premium paid without interest. Suppose q70 = 0.36, q71 = 0.40, and the interest rate is 100%. Find (a) the single premium, (b) 1V.
|
|
Determine income on an accrual basis
: a. Determine income on an accrual basis. b. Determine income on a cash basis.
|
|
Development of generally accepted accounting principles
: Certain underlying considerations have had an important impact on the development of generally accepted accounting principles. Following is a list of these underlying considerations, as well as a list of statements describing them.
|
|
Is j greater than less than or equal to i why
: All premiums were calculated at a constant interest rate of i. B earned a constant rate of j on his investments. Is j greater than, less than or equal to i? Why?
|
|
Problem regarding the breach of contract
: Identify the accounting principle(s) applicable to each of the following situations:
|
|
Explain how reserves will be affecte for whole life policies
: Suppose that a mortality table used to calculate reserves is altered. Explain how the reserves will be affected, for whole life policies with a constant death benefit and level premiums.
|
|
What will happen to the market clearing price and quantity
: Use supply and demand analysis where appropriate. Describe what will happen to the market clearing price and quantity. Make sure you explain your answers. As a part of your analyses, you should describe what happens to the supply and/or demand curves..
|