On December 31, 2004, Track Record Inc.'s sales people have firm outstanding orders totaling $1.66 million, which, it has guaranteed its customers, will be fulfilled during the month of January 2005. If Track Record includes the $1.66 million in its sales figures for 2004, it will be violating the: Materiality concept Historical cost concept Dual-aspect concept Realization concept 3. Which one of the following best describes a balance sheet? A description of the entity's operations over a period of time A snapshot at a point in time of an entity's assets, liabilities and owners' equity A reconciliation of an entity's bank account balance A description of the company's cash flows over a period of time 4. To be recorded as an asset, an item must meet four specific conditions. Three of them are: it must have been acquired at measurable cost, it must be obtained or controlled by the entity, and it must have been obtained or controlled in a past transaction. Which one of the following is the fourth condition? The item must have a measurable resale value It must be expected to have future economic benefits It must have been fully paid for The entity must have a legal document confirming ownership of the item 5. Neura Pharma, Inc. has purchased a drug patent with a remaining useful life of 13 years. How should this new asset be classified? A current tangible asset A non-current tangible asset A non-current intangible asset A current intangible asset 6. June Smith, a process engineer, has sold her 15-year patent for a new etching process to Silica Labs, Inc. In return, she has received $500,000 in cash and, based on its value on the sale date, $200,000 in common stock in Silica Labs. The stock is forecasted to double in market value over the next two months. How would this transaction be recorded by Silica Labs? Debit patent account $700,000; credit cash $500,000; credit common stock $200,000 Debit cash $500,000; debit common stock $200,000; credit patent account $700,000 Debit cash $500,000; credit patent account $500,000 Debit patent account $500,000; credit cash $500,000 7. Consider the same scenario as in the previous question: June Smith, a process engineer, has sold her 15-year patent for a new etching process to Silica Labs, Inc. In return, she has received $500,000 in cash and, based on its value on the sale date, $200,000 in common stock in Silica Labs. The stock is forecasted to double in market value over the next two months. Assuming that Silica Labs holds some long-term debt, which of the following describes the effect of the transaction on Silica Labs? Current ratio will decrease and total debt to equity ratio will increase Current ratio will increase and total debt to equity ratio will decrease Current ratio will increase and total debt to equity ratio will increase Current ratio will decrease and total debt to equity ratio will decrease 8. Lucky Lee, a video-game store in New York city, purchases a game machine directly from Taiwan for $30,000. In the U.S., the same machine will probably cost at least $36,000. Pick the most appropriate accounting action for Lucky Lee: Record the machine at $36,000 Record the machine at $30,000 Record the machine for [($30,000+$36,000)/2] = $33,000 Have the machine examined by an independent appraiser and record it at the appraised value 9. Which one of the following is an item of owners' equity? Bank loan Suppliers' monetary claims Prepaid expenses Earnings generated by the entity 10. Complete the following sentence: The Conservatism Concept directs an entity to consider recognizing a liability when it is __________________. absolutely certain economic resources may be sacrificed in the future remotely possible economic resources may be sacrificed in the future reasonably possible economic resources may be sacrificed in the future reasonably certain economic resources may be sacrificed in the future