1. According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on?
   1. Management control system
   2. Reporting on managements stewardship.
   3. The need for conservatism.
   4. The needs of the users of the information.

2. According to FASB conceptual framework, two fundamental qualitative characteristics that make accounting information useful for decision making are:

A. Neutrality and completeness

B. Fairness and precision

C. Relevance and faithful representation

D. Consistency and comparability

3. To be relevant, financial information should have which of the following?

A. Neutrality

B. Confirmatory value

C. Understandability

D. Costs and benefits

4. According to the FASB conceptual framework, the quality of information that enables users to identify similarities in and differences between two sets of economic phenomena is:

A. Conservatism

B. Neutrality

C. Matching

D. comparability

Illustration: Identify which basic assumption of accounting is best described in each item below.

Economic Entity, Periodicity, Going Concern, Monetary Unit,Measurement Principle (historical cost and fair value), Revenue Recognition, Expense Recognition, Full disclosure; Cost Constraint

(a). The economic activities of KC Corporation are divided into 12-month periods for the purpose of issuing annual reports. ___________________

(b) Solectron Corporation, Inc. does not adjust amounts in its financial statements for the effects of inflation. _____________________________

(c) Walgreen Co. reports current and noncurrent classifications in its balance sheet._______________

(d) The economic activities of General Electric and its subsidiaries are merged for accounting and reporting purposes. _______________

(e) KC Corporation reports revenue in its income statement when it is earned instead of when the cash is collected. _______________

(f) Yahoo, Inc. recognizes depreciation expense for a machine over the 2-year period during which that machine helps the company earn revenue._______________

(g) Oracle Corporation reports information about pending lawsuits in the notes to its financial statements._______________

(h) Eastman Kodak Company reports land on its balance sheet at the amount paid to acquire it, even though the estimated fair market value is greater. ______________

(i) Willis Company does not disclose any information in the notes to the financial statements unless the value of the information to users exceeds the expense of gathering it.______________