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Free AHM-520 Exam Braindumps (page: 24)

Page 23 of 55
PDF with 215 Questions

This concept, which is an extension of the going-concern concept, holds that the value of an asset that a company reports in its accounting records should be the asset's historical cost, not its current market value. Although this concept offers objectivity and reliability, it may lack relevance, particularly for assets held for a long period of time.

From the following answer choices, choose the name of the accounting concept that matches the description.

  1. Measuring-unit concept
  2. Full-disclosure concept
  3. Cost concept
  4. Time-period concept

Answer(s): C



In the following paragraph, a sentence contains two pairs of words enclosed in parentheses.

Determine which word in each pair correctly completes the statement. Then select the answer choice containing the two words that you have selected.

The Igloo health plan recognizes the receipt of its premium income during the accounting period in which the income is earned, regardless of when cash changes hands. However, Igloo recognizes its expenses when it earns the revenues related to those expenses, regardless of when it receives cash for the revenues earned. This information indicates that the (realization/capitalization) principle governs Igloo's revenue recognition, whereas the (matching/initial-recording) principle governs its expense recognition.

  1. realization / matching
  2. realization / initial-recording
  3. capitalization / matching
  4. capitalization / initial-recording

Answer(s): A



Under GAAP, three approaches to expense recognition are generally allowed: associating cause and effect, systematic and rational allocation, and immediate recognition. A health plan most likely would use the approach of systematic and rational allocation in order to

  1. Report the payment of the health plan's utility bills
  2. Spread the payment of sales force commissions over the premium paying period of healthcare coverage
  3. Report the fees paid by the health plan to attorneys and consultants
  4. Depreciate the cost of a new computer system over the useful life of the system

Answer(s): D



The Zane health plan uses a base of accounting known as accrual-basis accounting. With regard to this base of accounting, it can correctly be stated that accrual-basis accounting

  1. Enables an interested party to view the consequences of obligations incurred by Zane, but only if the health plan ultimately completes the business transaction
  2. Is not suitable for measuring Zane's profitability
  3. Requires Zane to record revenues when they are earned and expenses when they are incurred, even if cash has not actually changed hands
  4. Prohibits Zane from making adjusting entries to its accounting records at the end of each accounting year

Answer(s): C






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