44. the justification for the accrual basis of accounting lies in the needs of financial statement users for…

44. the justification for the accrual basis of accounting lies in the needs of financial statement users for precise information on the financial position and the profitability of the entity.\n a. true\n b. false\n45. costs incurred for purchases of merchandise result in an asset, merchandise inventory, and are eventually matched with revenue at the time the product is sold.\n a. true\n b. false\n46. which one of the following statements is true?\n a. recognition is concerned with the dollar amount of each economic effect that should be reported in the financial statements.\n b. measurement is concerned with how economic effects should be quantified.\n c. the stability concept is concerned with identification of the specific entity for which economic effects are to be recognized and measured.\n d. the monetary unit assumption is concerned with the valuation of economic effects in terms of current purchasing power.\n47. sallys choice sells season memberships for $200 each. during january of 2016, 60 season memberships were sold. as of march 31, 2016, only $3,000 of season membership fees had been collected from customers. the season runs for 4 months starting may 15, 2016. which one of the following is an amount reported on the financial statements for the period ending march 31, 2016?\n a. unearned membership revenue of $3,000\n b. unearned membership revenue of $9,000\n c. accounts receivable of $3,000\n d. membership revenue of $9,000

44. the justification for the accrual basis of accounting lies in the needs of financial statement users for precise information on the financial position and the profitability of the entity.\n a. true\n b. false\n45. costs incurred for purchases of merchandise result in an asset, merchandise inventory, and are eventually matched with revenue at the time the product is sold.\n a. true\n b. false\n46. which one of the following statements is true?\n a. recognition is concerned with the dollar amount of each economic effect that should be reported in the financial statements.\n b. measurement is concerned with how economic effects should be quantified.\n c. the stability concept is concerned with identification of the specific entity for which economic effects are to be recognized and measured.\n d. the monetary unit assumption is concerned with the valuation of economic effects in terms of current purchasing power.\n47. sallys choice sells season memberships for $200 each. during january of 2016, 60 season memberships were sold. as of march 31, 2016, only $3,000 of season membership fees had been collected from customers. the season runs for 4 months starting may 15, 2016. which one of the following is an amount reported on the financial statements for the period ending march 31, 2016?\n a. unearned membership revenue of $3,000\n b. unearned membership revenue of $9,000\n c. accounts receivable of $3,000\n d. membership revenue of $9,000

Answer

Brief Explanations:

  • For 44: The accrual - basis of accounting provides relevant information on financial position and profitability, so it's true.
  • For 45: When merchandise is purchased on account, it becomes an asset (Merchandise Inventory) and is matched with revenue when sold, so it's true.
  • For 46: Measurement is about quantifying economic effects, which is correct. Recognition is about when to record, stability concept is not a standard accounting concept in this context, and monetary - unit assumption is about using a stable currency unit, not current purchasing power.
  • For 47: The season starts on May 15, 2016. By March 31, 2016, no service has been provided yet. The total revenue from selling 60 memberships at $200 each is $12,000. Since only $3,000 has been collected, the unearned membership revenue is $12,000 and the amount collected ($3,000) is a liability (Unearned Membership Revenue) as of March 31, 2016.

Answer:

  1. a. True
  2. a. True
  3. b. Measurement is concerned with how economic effects should be quantified.
  4. a. Unearned membership revenue of $3,000