Homework – Chap 2
c) False, accounting standards based on individual frameworks will result in inconsistencies
d) False, capitol providers (although important) are not the only ones that benefit from financial statements. There are also the workers at the company (for ethical reasons) and the government that benefits.
b) confirmatory value
c) predictive value
g) Confirmatory value, materiality, completeness, neutrality
i) Faithful representation
j) Understandability, Verifiability
a) Gains and losses
d) Distributions to Owners
e) Comprehensive income, gains and losses, revenues
g) comprehensive income
k) distribution to owners
l) comprehensive income
a) expense recognition principle
b) Measurement principle (historical cost)
c) Full disclosure principle
d) Going concern assumption
e) Economic entity assumption
f) Periodicity assumption
g) Monetary unit assumption
a) If a company only reports net income, then that would not be following along with the concept of the Full disclosure principle. They need to disclose other information that may be a predictive factor for their investors. Anything that is on the balance sheet, statement of cash flows or the income statement must be disclosed.
b) Although they can report the equipment as an asset they cannot offset it against the liabilities as if they didn’t take out a loan. They must also report the equipment asset as 170,000 and the liability (notes payable) as 110,000
c) They must report not only the ending inventory but also cost of goods sold and the methods used in determining costs along with the inventory basis.
d) This is unethical because according to GAAP you must disclose the method used in determining the cost and in this case the valuation would change significantly if you changed from weighted average to FIFO.
a) The ethics of him using his expense account to purchase a new car...