Question

6. Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the

Select one:

a. relevance characteristic

b. comparability characteristic

c. economic entity

d. neutrality characteristic

7. Measurement uncertainty can affect....

Select one:

a, relevance characteristic

b. faithful representation and relevance characteristic

c. understandability characteristic

d. faithful representation characteristic

8. Erin Company applies the same accounting treatment to similar events from period to period. Erin Company is exhibiting which of the following qualities as described by the International Accounting Standards Board's (IASB'S) Conceptual Framework?

Select one:

a. All of the choices are correct.

b. Verifiability.

c. Consistency,

d. Predictive value.

9. The International Accounting Standards Board's (IASB) conceptual framework includes a cost-benefit constraint. Which of the following is true regarding this constraint?

Select one:

a. Benefits are more difficult to quantify than costs

b. Benefits to preparers may include access to capital at a lower cost

c. All of the choices are correct

d. The IASB seeks input on costs and benefits as part of their due process

10. In the International Accounting Standards Board's (I ASB's) Conceptual Framework, qualitative characteristics

Select one:

a. Distinguish better information from inferior information for decision-making purposes

b. Are considered either fundamental or enhancing

c. Contribute to the decision-usefulness of financial reporting information

d. All of the choices are correct

Answer 1

Question - (6)

Answer -

Option - (c) is correct, because economic entity assumption, states that all business entities should be accounted for separately and when a parent-subsidiary relationship exists, the financial statements of each separate entity are brought together, or consolidated. In the consolidated financial statements the concept of economic entity applies.

Note - Option - (a), Option - (b) and Option - (d) are incorrect, because all these concepts are not an examples of preparation of consolidated financial statements when a parent-subsidiary relationship exists.

.

Question - (7)

Answer -

Option - (d) is correct, because as per the conceptual framework a faithful representation is affected by level of measurement uncertainty.

Note - Option - (a), Option - (b) and Option - (c) are incorrect, because measurement uncertainty cannot affect all these concepts.

.

Question - (8)

Answer -

Option - (c) is correct, because the consistency principle states that once an entity adopts an accounting principle, it should be applied consistently in future. Erin Company applies the same accounting treatment to similar events from period to period. Hence consistency principle applies.

Option - (a) is incorrect, because all of the choices are not correct.

Option - (b) is incorrect, because verifiability means that the financial information presented in financial statements must be verifiable.

Option - (d) is incorrect, because predictive value are predictive possible future events.