Multiple-Choice Questions 1. A business uses the owner's private house as an office and pays a monthly rental of $1,500. Which of the following conventions is being applied? (A) Conservatism Convention (C) Accounting Entity Convention (B) Accrual Convention (D) Objectivity Convention 2. The business expects that it will make a large profit from the disposal of its fixed assets. However, this is not disclosed in the current financial statement. Which of the following conventions is being applied? (A) Conservatism Convention (C) Accounting Entity Convention (B) Historical Cost Convention (D) Consistency Convention 3. Your business bought a set of furniture for $5,000 at a very good bargain and another set for $4,500. You would have to pay $6,000 and $4,500 respectively if you acquired the furniture from another source. How much would you record this in the books of accounts based on historical cost? (A) $9,500 (C) $11,000 (B) $10,500 (D) $9,000 4. 'The owner and the business are regarded as separate bodies.' Which accounting concept aptly applies to this case? (A) Legal Entity Concept - (C) Historical Cost Concept (B) Accounting Entity Cncept (D) Prudence Concept 5. The accountants have the tendency to understate rather than overstate the profit and assets. The accounting concept which best describes the above statement is (A) Objectivity Concept (C) Accrual Concept (B) Consistency Concept (D) Prudence Concept