Chapter 2 Solutions.docx - Chapter 2 Solutions Questions 1 A 2 D Exercise 1 A Timeliness Because this is only an enhancing qualitative characteristic

Chapter 2 Solutions.docx - Chapter 2 Solutions Questions 1...

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Chapter 2 Solutions : Questions: 1. A 2. D Exercise 1: A. Timeliness. Because this is only an enhancing qualitative characteristic, the information may still be considered useful although it is lacking the timeliness characteristic. B. Faithful representation and verifiability. Because the information is lacking faithful representa- tion, one of the two fundamental qualitative characteristics, it would not be considered useful. C. Faithful representation and comparability. Because the information is lacking faithful representa- tion, one of the two fundamental qualitative characteristics, it would not be considered useful. D. Relevance. Because the information is lacking relevance, one of the two fundamental qualitative characteristics, it would not be considered useful. Exercise 2: A. This information is most likely irrelevant, because the brand of machinery is not likely to influ- ence the decision of users of the financial statements. The information does not have confirma- tory or predictive value. B. This information is relevant and contains both confirmatory and predictive value. C. This information is relevant, because it can be used by investors to make forecasts for future op- erations. D. This information is most likely irrelevant, because the average salary of employees is not likely to influence the decision of users of the financial statements. The overall cost of wages would be relevant and is reported in the income statement in various accounts.
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