QUESTION: 9

During a period when an enterprise is under the direction of a particular management, its financial statements will directly provide information about:

Both enterprise performance and management performance.
Management performance but not directly provide information about enterprise performance.
Enterprise performance but not directly provide information about management performance.
Neither enterprise performance nor management performance.

Answer(s): C

Explanation:

Choice "c" is correct. Financial reporting, and especially financial statements, usually cannot and do not separate management performance from enterprise performance. Financial reporting provides information about an enterprise during a period when it was under the direction of a particular management but does not directly provide information about that management's performance.
SFAC 1 para. 53

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QUESTION: 10

According to the FASB conceptual framework, which of the following statements conforms to the realization concept?

Equipment depreciation was assigned to a production department and then to product unit costs.
Depreciated equipment was sold in exchange for a note receivable.
Cash was collected on accounts receivable.
Product unit costs were assigned to cost of goods sold when the units were sold.

Answer(s): B

Explanation:

Choice "b" is correct. Revenues and gains are realized when assets are exchanged for cash or claims to cash. SFAC 5 para. 83.
Choice "a" is incorrect. Assigning depreciation in a production department is an example of allocating overhead. There is no realization associated with the assignment. Choice "c" is incorrect. The realization concept is integral to accounting for revenues and expenses and is not connected to collection of receivables.
Choice "d" is incorrect. Assignment of overhead costs to products and thus to cost of goods sold is an example of matching. There is no realization associated with this assignment.

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QUESTION: 11

In Yew Co.'s 1992 annual report, Yew described its social awareness expenditures during the year as follows:
"The Company contributed $250,000 in cash to youth and educational programs. The Company also gave $140,000 to health and human-service organizations, of which $80,000 was contributed by employees through payroll deductions. In addition, consistent with the Company's commitment to
the environment, the Company spent $100,000 to redesign product packaging." What amount of the above should be included in Yew's income statement as charitable contributions expense?

$310,000
$390,000
$410,000
$490,000

Answer(s): A

Explanation:

Choice "a" is correct. Charitable contributions include amounts the company gave to recognized charities. This includes:

Note: Of the $140,000, employees gave $80,000, and the company $60,000. Redesigning packaging is not a contribution to a charity.
Choice "b" is incorrect. The company gave only $60,000 of the $140,000. Employees gave $80,000. Choice "c" is incorrect. Redesigning packaging is not a contribution to a charity. Choice "d" is incorrect. The company gave only $60,000 of the $140,000. Employees gave $80,000. Redesigning packaging is not a contribution to a charity.

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QUESTION: 12

According to the FASB conceptual framework, which of the following relates to both relevance and reliability?

Comparability.
Feedback value.
Verifiability.
Timeliness.

Answer(s): A

Explanation:

Choice "a" is correct. Comparability and consistency are secondary qualities of both relevance and reliability. SFAC 2 para. 111-122
Choice "b" is incorrect. Feedback value is a key characteristic of relevance only. Choice "c" is incorrect. Verifiability is a key characteristic of reliability only. Choice "d" is incorrect. Timeliness is a key characteristic of relevance only.

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