1. An entity is a going-concern if it expects to cease operations within the next 12 months.

True False

2. The continuity assumption assumes that a company will have a perpetual life.

True False

3. If accounting information is timely and has predictive and feedback value, then it can be characterized as: A. Verifiable. B. Qualitative. C. Reliable. D. Relevant.

4. The sales manager of a firm has the use of a blue company-owned automobile to use to visit potential customers. The sales manager also owns her own identical car except that it is red. The manager paid for the red car with funds earned from her employment as sales manager. The firm will report the cost of the blue auto in its balance sheet, but not the red auto. This is an example of: A. Reliability B. Matching C. Separate entity D. Going concern E. None of these answers are correct.

5. If, in year 1, a company used straight-line method; year 2, double declining balance method; and in year 3, straight-line method for depreciating property, plant and equipment. Which of the following assumptions, constraints, or principles would be violated: A. cost. B. time period. C. matching. D. consistency. E. materiality.