QUESTION 2

Accounting standards prescribed by generally accepted accounting principles (GAAP) are important because:

	A.	they make the financial statements of all firms standardized.
	B.	they allow one to examine a firm's performance with ease over a period of time.
	C.	they make it possible for management or analysts to compare a firm's performance with that of other competitors.
	D.	All of the above.

QUESTION 3

The going concern assumption implies that:

	A.	a firm will continue to be in business for the foreseeable future.
	B.	a firm will be going out of business in the near future.
	C.	a firm will continue to operate in the near future, but only after being acquired by another firm.
	D.	None of the above.

QUESTION 4

The cost principle states that an asset should be recognized on the balance sheet:

	A.	at the market value of the asset.
	B.	at the market value less the accumulated depreciation on the asset.
	C.	at its historical cost.
	D.	at its historical cost plus the accumulated depreciation on the asset.

QUESTION 5

Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of $2.3 million, and the machinery is being depreciated annually at an amount of $230,000 for 10 years. Its market value on December 31, 2008 is $1.75 million. The firm's accountant is preparing its financial statement for the fiscal year end on December 31, 2008. The net value of the asset that should be reported on the balance sheet is:

	A.	$2.3 million.
	B.	$1.61 million.
	C.	$230,000.
	D.	$1.75 million.