Which of the following statements concerning the principle of accounting conservatism is true?
A. According to the tax law principle of conservatism, taxpayers should deduct expenses and losses in the earliest reasonable year.
B. According to the tax law principle of conservatism, taxpayers should deduct expenses and losses in the same year as they are reported on the taxpayers' financial statements.
C. According to the GAAP principle of conservatism, financial statements should report expenses and losses in the earliest reasonable year.
D. The GAAP principle of conservatism tries to prevent the overstatement of book income and the understatement of taxable income.
Answer: C
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Depreciation of factory buildings and equipment is an example of
a. direct labor. b. direct materials. c. factory overhead. d. operating expenses.
A balance sheet that places the liabilities and equity to the right of the assets is a(n):
A. Unclassified balance sheet. B. Classified balance sheet. C. Interim balance sheet. D. Report form balance sheet. E. Account form balance sheet.
The balance sheet reports the financial position of a company at a point in time.
Answer the following statement true (T) or false (F)
If markets are in equilibrium, which of the following conditions will exist?
A. Each stock's expected return should equal its required return as seen by the marginal investor. B. All stocks should have the same expected return as seen by the marginal investor. C. The expected and required returns on stocks and bonds should be equal. D. All stocks should have the same realized return during the coming year. E. Each stock's expected return should equal its realized return as seen by the marginal investor.