Chapter 6

Question 1

Consistency principle

Answer 1

business should use the same accounting methods and procedures form period to period

Question 2

Disclosure principle

Answer 2

financial statements should report enough info for outsiders to make knowledgeable decisions about the company

Question 3

Materiality concept

Answer 3

company must perform strictly proper accounting only for items that are specific to businesses financial situation

Question 4

Four inventory costing methods allowable by GAAP

Answer 4

1. Specific identification
2. First in, First out
3. Last in, First out
4. Weighted average

Question 5

Specific identification method

Answer 5

inventory method based on the cost of particular units of inventory

Question 6

First in, First out

Answer 6

assumes the first units purchased are the first to be sold

Question 7

Cost of goods available for sale

Answer 7

total cost spent on inventory that was available to be sold during a period

Question 8

Last in, first out

Answer 8

Assumes the first items units purchased are the last to be sold

Question 9

Weighted Average

Answer 9

computes a new weighted average cost per unit after each purchase

Question 10

Conservationism

Answer 10

if given two options that are equally good, choose the one that presents less revenue or more expenses because it is better to surprise than to disappoint