TRUE/FALSE
1.Inventory is carried at the lower of historical cost or replacement cost.
ANS: T
2.In SFAS No. 121, both the recognition and measurement criteria for the impairment of asset event is based on the excess of the carrying value of the asset over its fair market value.
ANS: F
3.In APB Opinion No. 29, the rule used to account for non-monetary exchanges of similar assets is consistent with the general principle of using the value of the economic sacrifice to measure the transaction.
ANS: F
4.All intangible assets are initially recorded at the sacrifice incurred to acquire the assets.
ANS: T
5.A constructive obligation is one that is implied rather than expressly written.
ANS: T
6.Although not specifically mentioned in the most recent definition of liabilities, deferred credits continue to be part of the liability section in the balance sheet under present practices.
ANS: T
7.APB Statement 4 and SFAC No. 5 indicate that liabilities are measured at amounts established in the transaction, usually amounts to be paid in the future, but never discounted.
ANS: F
8.The only method allowed by GAAP in accounting for convertible bonds is to treat the debt as conventional debt until conversion.
ANS: T
9.Owners’ equity is defined as the stockholders’ residual interest in the net assets of the firm.
ANS: T
10.In a sole proprietorship, there is a legal distinction between contributed capital and earned capital.
ANS: F
11.There is a movement in accounting policy toward fair or current values on the balance sheet.
ANS: T
12.U.S. Corporations are not permitted to trade in their own securities.
ANS: F
13.According to APB Opinion No. 25, the bargain amount of stock options is not recorded.
ANS: F
14.Derivatives are financial instruments whose value is based upon other financial instruments, stock indexes or interest rates, or interest rate indexes.
ANS: T
15.SFAS 133 values derivatives at fair value.
ANS: T