1) For a business combination, the purchase method views the business combination as
the acquisition of one entity by another. The firm doing the acquiring records the
identifiable assets and liabilities at fair value at the date of acquisition.
2) Under GASB Statement No. 34, the notes to the financial statements must include
budgetary information that includes the original budget and revised budgets.
3) Personal financial statements predominately use historical cost information.
4) The valuation problem from waiting to collect a receivable is ignored in the valuation
of receivables and notes that are classified as current assets.
5) The most accurate way to account for the success or failure of an entity is to
accumulate all transactions from the opening of business until the business eventually
liquidates.
6) The Sarbanes-Oxley Act has materiality implications.
7) Profitability ratios are the most likely ratios to be selected for corporate objectives.
8) When a subsidiary is not consolidated, it is accounted for as an investment on the
parent’s balance sheet.
9) Interim reports are useful in analyzing the impact of seasonality.
10) Uniformity of accounting for interstate electric companies is prescribed by the
Interstate Commerce Commission.
11) Repayment of a long-term bank loan would decrease the debt ratio.
12) Substantial research and development will result in more conservative earnings.
13) Capitalization of interest results in interest being added to a fixed asset instead of
expensed.
14) Nonprofit institutions, other than governments, use forms of financial reporting that
vary from the fund type of system to a commercial type of reporting.