VIEWS: 0 PAGES: 5 POSTED ON: 9/14/2012
chapter 14 Student: ___________________________________________________________________________ 1. Match the qualitative characteristics of accounting information with the descriptions by entering the proper letter in the space provided. (A) Comparability (B) Consistency (C) Feedback value (D) Neutrality (E) Predictive value (F) Relevance (G) Reliability (H) Representational faithfulness (I) Timeliness (J) Verifiability ___ 1. Information that helps the statement user confirm fulfillment or no fulfillment of prior expectations or decisions is said to have this qualitative characteristic. ___ 2. This qualitative characteristic means simply that the information should be dependable; such information is verifiable, is a faithful representation of the company's financial affairs, and is reasonably free of error and bias. ___ 3. This qualitative characteristic means that accounting information is capable of making a difference in a decision by the report user. ___ 4. If an entity uses the same accounting treatment for similar events and data from period to period, this qualitative characteristic is being met. ___ 5. If information is relevant, it will have this qualitative characteristic and enable statement users in making predictions about the meaning and ultimate outcome of events giving rise to the information. ___ 6. This qualitative characteristic is indicated when independent measurers obtain similar results. ___ 7. Information that is presented soon enough after events are reported to be useful in decision making would meet this qualitative characteristic. ___ 8. This is the concept that data shown in the financial reports reflect what really happened. ___ 9. Often referred to as objectivity; it is the idea that the financial statements are not prepared in a way to favor one group of users (management, owners, creditors, employees, etc.) over other groups. ___ 10. When the financial data is presented in such a manner that it can be meaningfully compared with the same data for other companies, it meets this qualitative characteristic. 2. In recent years, it has been reported that several large companies have manipulated business transactions and accounting records to change the net income reported on their income statements. Suggest five concepts, assumptions, principles, or conventions that such manipulation would violate. 3. The income statement shown below was prepared and sent by Jenna Preston, the owner of Preston Gifts, to several of her creditors. The business is a sole proprietorship that sells miscellaneous gifts. An accountant for one of the creditors looked over the income statement and found that it did not conform to generally accepted accounting principles. Using the following additional information provided by the owner, prepare an income statement in accordance with generally accepted accounting principles. Additional information provided by owner: All sales were for cash. The beginning and ending merchandise inventories were valued at their estimated selling price. The actual cost of the ending inventory is estimated to be $12,000. The actual cost of the beginning inventory is estimated to be $20,000. On December 31, 20--, suppliers of merchandise are owed $11,000. On January 1, 20--, they were owed $14,000. The owner paid herself a salary of $1,250 per month and charged this amount to the Salary of Owner account. A check for $800 to cover the December rent on the owner's personal apartment was issued from the firm's bank account. This amount was charged to Rent Expense. 4. Carlos Verde owns a small nursery. He recently approached the local bank for a loan to finance an expansion of his nursery. Carlos prepared the balance sheet given below and submitted it with his loan application. The balance sheet does not conform to generally accepted accounting principles. Using the additional information provided by the owner, prepare a corrected balance sheet in accordance with generally accepted accounting principles. Additional information provided by owner: The inventory has an original cost of $42,000. It is listed on the balance sheet at what it would cost to purchase today. Included in the cash listed on the balance sheet is $4,000 in Carlos Verde's personal checking account. Depreciation allowable to date on the equipment is $5,000. Depreciation allowable to date on the truck is $3,000.
Pages to are hidden for
"chapter 14 group activity"Please download to view full document