These chapters are important foundation chapters and if you cannot understand these chapters it will impact your performance in later chapters. Please let me know if you have questions. 15 True False Total 7. 5 opt. –1/2 opt. Each. Required: For each statement below state if it is True or False. 1 . The time-period assumption assumes that a company prepares its financial statements every month. Answer:F 2. Because it tends to provide the most reliable measure of activity, all assets are reported on the balance sheet at their fair market values.
Answer:T 3. The term used to refer to an asset’s original cost is book value. . The going concern assumption infers that a company will continue to operate into the future. 5. A company in the process of liquidation is considered to be under the going concern assumption. 6. There are more corporations than sole proprietorships and partnerships in the United States. 7. The three main business activities are financing, operating, and investing. 8. Internal users of accounting information include present creditors and management. . The income statement summarizes the assets, liabilities and stockholders’ equity for a period of time. 0. The four basic financial statements are the Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows. 11. When a company recognizes the portion of supplies used during a year, the effect is to decrease net income. 12. Adjusting entries are prepared using the accrual basis of accounting for preparing financial statements. 13. Accrued revenue is recognized when cash is received. 14.
Most companies use the accrual basis of accounting because it is required under generally accepted accounting principles. 15. Three months before its year-end, a company signed a $250,000, 12%, 8-month note. Principal and interest will be paid at maturity. No interest should be accrued at year-end because the company has no obligation to pay the interest until the note matures. Problem 1 Worth total 7 puts. ?I/2 puts. For each account Health Clinic began business as a corporation in 2014. Several transactions which occurred early in 2014 are described below.