Assignment Questions - Assignment 1 CA1 4(Need for GAAP...

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Assignment 1 CA1- 4 (Need for GAAP) Some argue that having various organizations establish accounting principles is wasteful and inefficient. Rather than mandating accounting rules, each company could voluntarily disclose the type of information it considered important. In addition, if an investor wants additional information, the investor could contact the company and pay to receive the additional information desired. Instructions Comment on the appropriateness of this viewpoint. CA1- 11 (Accounting Pronouncements) Standard-setting bodies have issued a number of authoritative pronouncements. A list is provided on the left, below, with a description of these pronouncements on the right. Instructions Match the description to the pronouncements. 1. _____ Staff Positions (a) Official pronouncements of the APB. 2. _____ Interpretations (of the Financial Accounting Standards Board) (b) Sets forth fundamental objectives and concepts that will be used in developing future standards. 3. _____ Statement of Financial Accounting Standards (c) Primary document of the FASB that establishes GAAP. 4. _____ EITF Statements (d) Provides additional guidance on implementing or applying FASB Standards or Interpretations. 5. _____ Opinions (e) Provides guidance on how to account for new and unusual financial transactions that have the potential for creating diversity in financial reporting practices. 6. _____ Statement of Financial Accounting Concepts (f) Represent extensions or modifications of existing standards. 1
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BE2- 8 Presented below are three different transactions related to materiality. Explain whether you would classify these transactions as material. (a) Blair Co. has reported a positive trend in earnings over the last 3 years. In the current year, it reduces its bad debt allowance to ensure another positive earnings year. The impact of this adjustment is equal to 3% of net income. (b) Hindi Co. has an extraordinary gain of $ 3.1 million on the sale of plant assets and a $ 3.3 million loss on the sale of investments. It decides to net the gain and loss because the net effect is considered immaterial. Hindi Co.’s income for the current year was $ 10 million. (c) Damon Co. expenses all capital equipment under $25,000 on the basis that it is immaterial. The company has followed this practice for a number of years. BE2- 9 If the going concern assumption is not made in accounting, discuss the differences in the amounts shown in the financial statements for the following items. (a) Land. (b) Unamortized bond premium. (c) Depreciation expense on equipment. (d) Merchandise inventory. (e) Prepaid insurance. BE2- 10 What accounting assumption, principle, or constraint would Target Corporation use in each of the situations below? (a) Target uses the lower of cost or market basis to value inventories.
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Assignment Questions - Assignment 1 CA1 4(Need for GAAP...

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