Solutions Manual For Financial Reporting, Financial Statement
Analysis and Valuation 9th Edition By James M. Wahlen;
Stephen P. Baginski; Mark Bradshaw 9781337614689 ALL
Chapters .
If the decision is made that a company is not a going concern, then generally accepted accounting
principles do not apply. - ANSWER: True
A company that uses a calendar year for its accounting year end, and a company that uses a fiscal
year for its accounting year end, both typically have a year end of December 31. - ANSWER: False
According to the conservatism principle, inventory that has a market value below the historical cost
should be written down in order to recognize a loss. - ANSWER: False
A quality requiring that the information be timely and that it also have predictive value, feedback
value, or both. This describes which qualitative characteristic of useful accounting information?
a. Relevance
b. Reliability
c. Verifiability
d. Materiality - ANSWER: a. Relevance
The matching concept involves the determination of when to recognize the costs associated with the
revenue that is being recognized. - ANSWER: True
The concept of materiality allows the accountant to handle immaterial items in the most economical
and expedient manner possible. - ANSWER: True
Revenue from sales on account (credit sales) is typically recognized at the time the cash is collected -
ANSWER: False
The SEC has the legal power to determine generally accepted accounting principles. - ANSWER: True
The accural basis income statement recognizes revenue when it is realized (realization concept) and
expenses recognized when they are incurred (matching concept). The cash basis recognized revenue
when the cash is received and expenses when payments are made. - ANSWER: True
Under the Sarbanes-Oxley Act, the financial statements auditor doesn't have to report on
management's assertion as to the effectiveness of the internal controls and procedures as of the
company's year end. - ANSWER: False
The responsibility for the preparation and integrity of financial statements rests with the auditor. -
ANSWER: False
A review consists principally of inquiries of company personnel and analytical procedures applied to
financial data. It is substantially less in scope than an examination in accordance with generally
accepted auditing standards. - ANSWER: True
The accountant expresses an opinion on reviewed financial statements. - ANSWER: False
Which of the following is not one of the three principal financial statements of a corporation?
a. Balance Sheet
b. Statement of Cash Flows
c. Income Statements
, d. Statements of Changes in Financial Position - ANSWER: d. Statements of Changes in Financial
Position
Notes to the financial statements increase the full disclosure of the statements by providing
additional information on inventory and depreciation methods, subsequent events, contingent
liabilities, etc. - ANSWER: True
The properly-prepared statement of cash flows will show operating activities, investing activities, and
financing activities, in that order. - ANSWER: True
The basic accounting equation is : Assets= Liabilities + Stockholder's equity - ANSWER: True
The income of a partnership is taxable to the individuals who are members of the partnership, and
the owners have unlimited liability for the debts of the company. - ANSWER: True
The SEC requires that a company's code of ethics be included in the annual report, published on its
web site, or displayed in the lobby of its corporate headquarters. - ANSWER: False
Which of the following is a permanent account?
a. Advertising Expense
b. Dividends
c. Accounts Receivable
d. Revenue - ANSWER: c. Accounts Receivable
The three major categories of balance sheet accounts are assets, liabilities and shareholder's equity, -
ANSWER: True
A properly prepared Balance Sheet lists current assets in order of liquidity, which is the ease with
which they can be converted into cash. - ANSWER: True
Land is depreciated because of the value of natural resources. - ANSWER: False
Which of the following is not a current asset?
a. Notes Receivable
b. Prepaid Rent
c. Marketable Securities
d. Wages Payable - ANSWER: Wages Payable
When a rental agency collects rent in advance, it is recorded as an asset. - ANSWER: False
Treasury stock represents the stock of the company that has been sold, repurchased, and not retired.
It is added to stockholder's equity. - ANSWER: False
The gain from the sale of land would appear on a conventional balance sheet. - ANSWER: False
Bonds payable would usually be classified as a long term liability. - ANSWER: True
The current assets section of the balance sheet should include inventory. - ANSWER: True
Which of the following is not a type of inventory for a manufacturing firm?
a. Raw Materials
b. Work in Process
c. Merchandise Inventory
d. Finished Goods - ANSWER: c. Merchandise Inventory
Discuss the role of the following in the formulation of accounting principles:
Analysis and Valuation 9th Edition By James M. Wahlen;
Stephen P. Baginski; Mark Bradshaw 9781337614689 ALL
Chapters .
If the decision is made that a company is not a going concern, then generally accepted accounting
principles do not apply. - ANSWER: True
A company that uses a calendar year for its accounting year end, and a company that uses a fiscal
year for its accounting year end, both typically have a year end of December 31. - ANSWER: False
According to the conservatism principle, inventory that has a market value below the historical cost
should be written down in order to recognize a loss. - ANSWER: False
A quality requiring that the information be timely and that it also have predictive value, feedback
value, or both. This describes which qualitative characteristic of useful accounting information?
a. Relevance
b. Reliability
c. Verifiability
d. Materiality - ANSWER: a. Relevance
The matching concept involves the determination of when to recognize the costs associated with the
revenue that is being recognized. - ANSWER: True
The concept of materiality allows the accountant to handle immaterial items in the most economical
and expedient manner possible. - ANSWER: True
Revenue from sales on account (credit sales) is typically recognized at the time the cash is collected -
ANSWER: False
The SEC has the legal power to determine generally accepted accounting principles. - ANSWER: True
The accural basis income statement recognizes revenue when it is realized (realization concept) and
expenses recognized when they are incurred (matching concept). The cash basis recognized revenue
when the cash is received and expenses when payments are made. - ANSWER: True
Under the Sarbanes-Oxley Act, the financial statements auditor doesn't have to report on
management's assertion as to the effectiveness of the internal controls and procedures as of the
company's year end. - ANSWER: False
The responsibility for the preparation and integrity of financial statements rests with the auditor. -
ANSWER: False
A review consists principally of inquiries of company personnel and analytical procedures applied to
financial data. It is substantially less in scope than an examination in accordance with generally
accepted auditing standards. - ANSWER: True
The accountant expresses an opinion on reviewed financial statements. - ANSWER: False
Which of the following is not one of the three principal financial statements of a corporation?
a. Balance Sheet
b. Statement of Cash Flows
c. Income Statements
, d. Statements of Changes in Financial Position - ANSWER: d. Statements of Changes in Financial
Position
Notes to the financial statements increase the full disclosure of the statements by providing
additional information on inventory and depreciation methods, subsequent events, contingent
liabilities, etc. - ANSWER: True
The properly-prepared statement of cash flows will show operating activities, investing activities, and
financing activities, in that order. - ANSWER: True
The basic accounting equation is : Assets= Liabilities + Stockholder's equity - ANSWER: True
The income of a partnership is taxable to the individuals who are members of the partnership, and
the owners have unlimited liability for the debts of the company. - ANSWER: True
The SEC requires that a company's code of ethics be included in the annual report, published on its
web site, or displayed in the lobby of its corporate headquarters. - ANSWER: False
Which of the following is a permanent account?
a. Advertising Expense
b. Dividends
c. Accounts Receivable
d. Revenue - ANSWER: c. Accounts Receivable
The three major categories of balance sheet accounts are assets, liabilities and shareholder's equity, -
ANSWER: True
A properly prepared Balance Sheet lists current assets in order of liquidity, which is the ease with
which they can be converted into cash. - ANSWER: True
Land is depreciated because of the value of natural resources. - ANSWER: False
Which of the following is not a current asset?
a. Notes Receivable
b. Prepaid Rent
c. Marketable Securities
d. Wages Payable - ANSWER: Wages Payable
When a rental agency collects rent in advance, it is recorded as an asset. - ANSWER: False
Treasury stock represents the stock of the company that has been sold, repurchased, and not retired.
It is added to stockholder's equity. - ANSWER: False
The gain from the sale of land would appear on a conventional balance sheet. - ANSWER: False
Bonds payable would usually be classified as a long term liability. - ANSWER: True
The current assets section of the balance sheet should include inventory. - ANSWER: True
Which of the following is not a type of inventory for a manufacturing firm?
a. Raw Materials
b. Work in Process
c. Merchandise Inventory
d. Finished Goods - ANSWER: c. Merchandise Inventory
Discuss the role of the following in the formulation of accounting principles:
