1) Retailers who sell a product with a warranty period can recognize revenue when

a)the warranty period has expired.

b)at the point of sale if the warranty amount can be estimated.

c)when cash is collected.

d)when the exact cost of the items sold is known.

2) Information is understandable when it is understood by users

a)who have a reasonable understanding of financial reporting.

b)who have a reasonable knowledge of business and economic activities.

c)because the information provided is classified, and presented clearly and concisely.

d)all of the above.

3) The information provided in the notes that accompany financial statements is required because of the

a)cost principle.

b)full disclosure principle.

c)matching principle.

d)Revenue recognition principle.

4) Accounting information is neutral if

a)it is free from bias.

b)the amount of assets equals the amount of liabilities.

c)The trial balance balances.

d)all of the information is present to show the economic reality of the transaction.

5) A company can change to a new accounting principle if management can justify that the new principle results in

a)more relevant and faithful representation of the financial presentation in the statements.

b)a higher profit.

c)a lower profit for tax purposes.

d)less likelihood of clerical errors.