Chapter 2 HW Solutions.docx - Solutions to Chapter 2 Online Material Questions 1 D 2 C 3 FALSE 4 TRUE 5 D Exercise 1 A This process would be considered

Chapter 2 HW Solutions.docx - Solutions to Chapter 2 Online...

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Solutions to Chapter 2 Online Material: Questions: 1. D 2. C 3. FALSE 4. TRUE 5. D Exercise 1: A. This process would be considered a reporting entity because it contains all three features. (1) Eco- nomic activity is being conducted, (2) the activity can be objectively distinguished, and (3) eco- nomic information would be useful to potential investors as some have already shown interest in investing. B. Rubber Company would be considered a reporting entity because it contains all three features. Its financial dependency on Manufacturing Company does not impact its status as a reporting entity. C. The two sub-processes would not be considered separate reporting entities because the economic activities of cutting and preparing the glass and cutting and assembling the wood are not objec- tively distinguishable. Rather, the two sub-processes taken together as a whole are the reporting entity. Exercise 2: A. Because of the extremely low probability of winning the lottery, the first requirement for recogni-
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