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Management can justify a new method of accounting if the
financial information is more meaningful.
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A company can change to a new method of accounting if management
can justify that the new method results in terms of
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less likelihood of clerical errors.
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more meaningful financial information.
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a higher net income.
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a lower net income for tax purposes.
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The historical cost principle requires that if a company buys a
building for $2,000,000 in 2012 that increases in value to $2,900,000 in 2014,
the company will have to report the building at $2,000,000 in the balance sheet
for 2014.
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True
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False
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An
amount such as $7,200 is likely an account balance, which can be used to
calculate a ratio. However, it is not a way to express a ratio. Ratios can be
stated in the form of a percentage (such as 50%), a rate (such as 1.5 times
greater than a reference), or a simple proportion (like 1:2).
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Which of the following does not properly reflect
a financial ratio?
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$7,200
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$0.60 per dollar
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18.4%
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7:1
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