Enhancing qualitative characteristics of accounting information include each of the following except:
Answer
Materiality
The primary objective of financial accounting information is to provide useful information to:
Answer
Capital providers
Somerset Leasing received $33,600 for 12 months' rent in advance. How should Somerset record this transaction?
Answer
Net income equals:
Answer
Revenues minus expenses.
On December 31, 2020, Coolwear, Inc. had a balance in its prepaid insurance account of $53,400. During 2021, $91,000 was paid for insurance. At the end of 2021, after adjusting entries were recorded, the balance in the prepaid insurance account was $44,500. Insurance expense for 2021 was:
Answer
Insurance expense = $53,400 + $91,000 − $44,500 = $99,900
Of the following, the most important objective for financial reporting is to provide information useful for:
Answer
Making decisions
Accruals occur when cash flows:
Answer
Occur after revenue or expense recognition.
Fundamental qualitative characteristics of accounting information are:
Answer
Faithful representation and relevance.
A constraint on qualitative characteristics of accounting information is:
Answer
Cost-effectiveness.
Mama's Pizza Shoppe borrowed $6,600 at 12% interest on May 1, 2021, with principal and interest due on October 31, 2022. The company's fiscal year ends June 30, 2021. What adjusting entry is necessary on June 30, 2021?
Answer
Explanation
Accrued interest expense: $6,600 × 12% × 2/12 = $132
Management has decided to change the estimated useful life of a machinery but fails to disclose this change in the financial statements. This violation of GAAP can cause the information to be misleading because it lacks
Answer
Completeness
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