Select the best answer to each of the following questions:}

1. The assumption that each business has an existence separate from its owners, creditors, employees, customers, other interested parties, and other businesses is the:

a. Going-concern assumption.

b. Business entity concept.

c. Separate entity concept.

d. Corporation concept.

2. Companies should use liquidation values to report assets if which of the following conditions exists?

a. There are changes in the value of the dollar.

b. The periodicity assumption is applied.

c. The company is not a going concern and will be dissolved.

d. The accrual basis of accounting is not used.
3. Assume that a company has paid for advertising and that the ad has already appeared. The company chose to report the item as prepaid advertising and includes it among the assets on the balance sheet. Previously, the company had always expensed expenditures such as this. This practice is a violation of:

a. Generally accepted accounting principles.

b. The matching concept.

c. The consistency concept.

d. All of the above.
4. Recording revenue only after the seller has obtained the right to receive payment from the buyer for merchandise sold or services performed is called the:

a. Earning principle.

b. Installment basis.

c. Realization principle.

d. Completed-contract method.
5. Assume that 2,000 ounces of gold were mined at a time when gold sold for \(\$ 500\) an ounce. The cost to extract the gold was \(\$ 300\) per ounce. Revenue was recognized under the production basis. The gold has not yet been sold. The entry to record the extraction of the gold would include:

a. A debit to Inventory of Gold for \(\$ 600,000\).

b. A credit to Revenue from Extraction of Gold of \(\$ 1,000,000\).

c. A debit to Cash of \(\$ 1,000,000\).

d. A credit to Inventory of Gold of \(\$ 1,000,000\).