Brief Exercise 11

Revenues ($340,000 + 60,000)

Expenses:
Rent ($40,000 2)
Salaries
Utilities ($50,000 + 2,000)
Net income

$400,000
(20,000)
(120,000)
(52,000)
$208,000

Brief Exercise 13
1.
2.
3.
4.

The periodicity assumption

The economic entity assumption
Revenue recognition
Expense recognition

Brief Exercise 14
1. Expense recognition
2. The historical cost (original transaction value) principle
3. The economic entity assumption

Brief Exercise 15
1.
2.
3.
4.

Disagree
Agree
Disagree
Agree

The full disclosure principle

The periodicity assumption
Expense recognition
Revenue recognition

Exercise 17
List A
o
1. Predictive value
transfers to
h
2. Relevance
value of
g
3. Timeliness
comparisons.
a
4. Distribution to owners
over time.
j
5. Confirmatory value
context
of
e
6. Understandability
phenomenon
represent.
n
7. Gain
decision.
f
8. Faithful representation
k
9. Comprehensive income
measurers.
p 10. Materiality
c 11. Comparability
transactions.
m 12. Neutrality
financial
l 13. Recognition
d 14. Consistency
book
b 15. Cost effectiveness
future.
i 16. Verifiability
its effect on

List B
a. Decreases in equity resulting from
owners.
b. Requires consideration of the costs and
information.
c. Important
for
making
interfirm
d. Applying the same accounting practices
e. Users understand the information in the
the
decision being made.
f. Agreement between a measure and the
it purports to
g. Information is available prior to the
h. Pertinent to the decision at hand.
i. Implies consensus among different
j. Information confirms expectations.
k. The change in equity from nonowner
l. The process of admitting information into
statements.
m. The absence of bias.
n. Results if an asset is sold for more than its
value.
o. Information is useful in predicting the
p. Concerns the relative size of an item and
decisions.

Exercise 18
1.
2.
3.
4.
5.
6.
7.
8.

Materiality
Neutrality
Consistency
Timeliness
Predictive value and/or confirmatory value
Faithful representation
Comparability (Consistency)
Cost effectiveness

Exercise 19
List A
d
1. Expense recognition
and other
g
2. Periodicity
e
3. Historical cost principle
i
4. Materiality
revenue is
h
5. Revenue recognition
acquisition.
c
6. Going concern assumption
should be
b
7. Monetary unit assumption
into artificial
a
8. Economic entity assumption
point of sale.
f
9. Full-disclosure principle
its effect on

List B
a. The enterprise is separate from its owners
entities.
b. A common denominator is the dollar.
c. The entity will continue indefinitely.
d. Record expenses in the period the related
recognized.
e. The original transaction value upon
f. All information that could affect decisions
reported.
g. The life of an enterprise can be divided
time periods.
h. Criteria usually satisfied for products at
i. Concerns the relative size of an item and
decisions.

Exercise 110
1.
2.
3.
4.
5.
6.
7.

The economic entity assumption

The periodicity assumption
Expense recognition (also the going concern assumption)
The historical cost (original transaction value) principle
The realization (revenue recognition) principle
The going concern assumption
Materiality

Exercise 114
Statement
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

d.
h.
g.
e.
c.
a.
i.
j.
f.
b.

Concept
Monetary unit assumption
Full-disclosure principle
Expense recognition
Historical cost principle
Periodicity assumption
Economic entity assumption
Cost effectiveness
Materiality
Conservatism
Going concern assumption

CPA / CMA REVIEW QUESTIONS

CPA Exam Questions
1. a. Auditor independence is not a qualitative characteristic.
2. b. Neutrality is an attribute of faithful representation.
3. b. The FASB is a private body, though the SEC has the ultimate
authority to set accounting standards. The FASB does not
set auditing standards nor does it consist entirely of the
members of the American Institute of CPAs.
4. a. Confirmatory value is an ingredient of the primary quality
of relevance.
5. d. Predictive value is an ingredient of relevance.
6. b. Completeness is an ingredient of faithful representation.
7. b. The objective of financial reporting is to provide information
that is useful to present and potential investors and creditors
and other users in making rational investment, credit, and
other similar decisions.
8. d. Comprehensive income excludes only owner transactions.

9. d. The equivalent to FASAC for the IASB is the Standards

Advisory Council.
10. c. The conceptual framework does not include specific
implementation guidance for particular complex standards.

CMA Exam Questions

1. b. Accounting standards in the United States for
nongovernmental entities are set primarily by the private sector.
The principle standard setters are the FASB and the AICPAs
AcSEC.
2. c. Verifiability implies a consensus among different measurers.
3. c.
The four fundamental recognition criteria are (1)
the item meets the definition of an element of financial
statements, (2) the item has an attribute measurable with
sufficient reliability, (3) the information is relevant, and (4) the
information is reliable. In addition, revenue should be
recognized when it is realized or realizable and earned.