The Consistency Concept

question 94

Multiple Choice

The consistency concept:

• A) Prescribes a company to consistently apply the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting.
• B) Requires a company to use one method of inventory valuation exclusively.
• C) Requires that all companies in the same industry use the same accounting methods of inventory valuation.
• D) Is also called the full disclosure principle.
• E) Is also called the matching principle.

---

Definitions:

Bonds

These are fixed-income investment products where an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.

Debt Instruments

Financial assets that represent a debtor's obligation to repay borrowed money or other forms of credit to the creditor according to stated terms.

Original Issue Discount

The difference between the par (face) value of a bond and the lower price at which it was originally sold, which must be reported as interest income over the life of the bond.

Tax-exempt Debt

Debt securities issued by state or municipal governments whose interest payments are exempt from federal income tax, and sometimes state and local taxes.