Which Statement Is Correct

question 113

Multiple Choice

Which statement is correct?

• A) As long as a company consistently uses the cash basis of accounting generally accepted accounting principles allow its use.
• B) The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles.
• C) The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.
• D) As long as management is ethical there are no problems with using the cash basis of accounting.

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Definitions:

Trade Fixtures

Items of personal property brought upon the land by a tenant that are necessary to carry on the trade or business to which the premises will be devoted. Contrary to the general rule, trade fixtures remain the personal property of the tenant and are removable at the expiration of the terms of occupancy.

Quitclaim Deed

A deed that transfers to the buyer only the interest that the seller may have in a property and that contains no warranties.

Warranties of Title

Legal guarantees provided by a seller to a buyer that the seller has the right to sell the property and that the property is free from any lien or encumbrance.

Subterranean Rights

Refers to the rights to use and exploit underground resources such as minerals, oil, and natural gas located beneath a property.