TESTI TRUE OR FALSE: Write the word True if the sentence is correct and False if the sentence is wrong. 1. Liquidity is the same as solvency. 2. Shareholders are internal users of financial reports. 3. In measuring financial performance, accrual accounting is used because it recognizes revenue when cash is received. 4. The accrual basis of accounting is most useful for predicting the long term financial performance. 5. The valuation of promise to receive cash in the future at present value is valid because of the going concern accounting concept. 6. The stable peso postulate is actually an amplification of the going concern assumption, so much so that adjustments are unnecessary to reflect any changes in the purchasing power. 7. There can be a significant gap between historical cost and replacement cost of an asset. 8. Understandability is the term that best describes information that that influences the economic decision of the user. 9. Revenue is recognized upon signing of the contract. 10. A liability is classified as current even if the lender has agreed after the reporting period and before the statements are authorized for issue, not to demand payment as a consequence of the breach. 11. A financial liability due within twelve months after the reporting period shall be classified as non-current. 12. The LIFO favors the income statement because there is a matching of current cost against current revenue, the cost of the goods sold being expressed in terms of current or recent cost. 13. Non adjusting events after the reporting period are those that are indicative of conditions that arise after the end of the accounting period. 14. Depreciation maybe part of the cost of goods manufactured or operating expense. 15. The production or output method assumes that depreciation is more a function of use rather than passage of time