Answer the following statements true (T) or false (F)
1) A company is uncertain whether a complex transaction should be recorded as a gain or loss. Under the conservatism principle, it should choose to treat it as a loss.
2) A company is uncertain whether a complex transaction should result in an asset being recorded at $100,000 or at $150,000. Under the conservatism principle, it should choose to show it at $100,000.
3) The consistency principle states that businesses should report the same amount of ending merchandise inventory from period to period.
4) The disclosure principle states that a company should report enough information for outsiders to make knowledgeable decisions about the company.
5) A company discovers that its cost of goods sold is understated by an insignificant amount. It does not need to correct the error because of the conservatism principle.
1. TRUE
2. TRUE
3. FALSE
4. TRUE
5. FALSE
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