The type of money prices which uses such concepts as present value, discounted cash flow and value in use is known as:

(a) price in a current purchase exchange (c) price based on future exchange

(b) price in a past exchange (d) price in a current sale exchange

33. All accounts in the financial statements are affected to a certain extent by inflationary conditions, but the effect is more explicit in some accounts than in others. Which account is the more seriously affected by inflation?

(a) property, plant and equipment (c) receivables

(b) merchandise inventory (d) cash

34. The recognition of the deficiencies of historical cost accounting has led to the advocacy of the recognition of the effects of inflation in the accounts. The following statements characterize the recognition of the effects of inflation except:

(a) all accounts in the financial statements are affected to a certain extent by inflationary

conditions, and the effect is more explicit in some accounts than in others

(b) restating the entire financial statements in terms of current prices is a very complicated

process and requires considerable additional work

(c) users of financial statements advocate the recognition of the effects of inflation in the

accounts because historical cost creates the impression that the business entity is more

profitable than what it really is

(d) inflation affects more drastically those items in the accounts where the rate of turnover

is quite high

35. In the event of conflict between the economic substance of a transaction and its legal form, the economic substance shall prevail. This concept is known as:

(a) form over substance (c) faithful representation (b) substance over form (d) completeness

36. The financial accounting information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users.

(a) relevance (c) neutrality

(b) verifiability (d) completeness

37. John Company does not know exactly how long its equipment will last. It decides to use shorter rather than longer useful life for depreciating the equipment. What accounting concept is being applied in this decision?

(a) reliability (c) materiality (b) relevance (d) conservatism

38. It is the exercise of care and caution in dealing with uncertainties in measurement so s not to overstate assets and income and not understated liabilities and expenses.

(a) completeness (c) faithful representation (b) prudence (d) neutrality