A Firm Signs a Major Contract in December to Construct

question 50

Multiple Choice

A firm signs a major contract in December to construct custom machinery for a client. No work is begun the current year, yet the notes to the firm's financial statements discuss the nature and dollar amount of the contract. This is an example of

• A) Reliability
• B) Full disclosure
• C) Historical cost
• D) Conservatism
• E) None of these answers are correct.

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Definitions:

Governing Framework

The system of rules, practices, and processes by which a government is directed and controlled.

Full Faith

A clause in the U.S. Constitution (Full Faith and Credit Clause) requiring each state to recognize the public acts, records, and judicial proceedings of every other state.

Tenth Amendment

An amendment to the U.S. Constitution stating that the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Federal Government

The national government of the United States, composed of three branches: legislative, executive, and judicial.