The conceptual framework indicates the desired fundamental and enhancing qualita

Question

The conceptual framework indicates the desired fundamental and enhancing qualitative characteristics of accounting information. Several constraints impede achieving these desired characteristics. Answer each of the following questions related to these characteristics and constraints 1. Which component would allow a large company to record the purchase of a $120 printer as an expense rather than capitalizing the printer as an asset? 2. Donald Kirk, former chairman of the FASB, once noted that... there must be public confidence that the standard-setting system is credible, that selection of board members is based on merit and not the influence of special interests.." Which characteristic is implicit in Mr. Kirk's statement? 3. Allied Appliances, Inc., changed its revenue recognition policies. Which characteristic is jeopardized by this change? 4. National Bancorp, a publicly traded company, files quarterly and annual financial statements with the SEC. Which characteristic is relevant to the timing of these periodic filings? 5. In general, relevant information possesses which qualities? 6. When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic? 7. Jeff Brown is evaluating two companies for future investment potential. Jeffs task is made easier because both companies use the same accounting methods when preparing their financial statements. Which characteristic does the information Jeff will be using possess? 8. A company should disclose information only if the perceived benefits of the disclosure exceed the costs of providing the information. Which constraint does this statement describe?

Explanation / Answer

1. Materiality- When the operations of the company is large so Small cost of $ 120 is considered immaterial and can be considered as expense instead of capatizling it as asset .

2.Neutraity- Financial Statement need to be Prepared without influencing Any decision which means it should be Neutral.

3.Consistency- Company must follow same Policies consistently in Future accounting periods however it can be changed if changing Policies give More proper result.

4.Timeliness- It is Important as providing financial information on time to make proper decision.

5.Predictive Value, Confirmatory value, and/or materiality- The information must possesses these qualities so that users able to take proper decision.

6.Faithful representation-  The financial statements be produced that accurately reflect the condition of a business.

7.Comparability- To analyse the financial statements of two companies both should have the characterisitc of comparability.

8. Cost Effectiveness-  Its a Form of analysis which compares the cost and outcomes of the particular action.

AXEL CORPORATION Income Statement For the Year Ended December 31, 2016 Sales Revenue $ 592,000.00 Cost of Goods Sold $ 325,000.00 Gross Profit $ 267,000.00 Operating Expenses Selling Expenses $   67,000.00 Administrative Expenses $   87,000.00 Restructuring Expenses $   55,000.00 Total Operating Expenses $ 209,000.00            Operating Income $    58,000.00 Other Income(Expense) Interest and Dividend $   32,000.00 Interest Expense $ (26,000.00) Total other income Net $      6,000.00 Income before income taxes $    64,000.00 Income tax expense $    60,000.00 Income before Extraordinary Item $      4,000.00 Extraordinary item: Gain on Sale of invesments $    86,000.00 Net income $    90,000.00 Earnings Per share (EPS) Income before Extraordinary Item $               0.04 Extraordinary gain(loss) $               0.86 Net Income $               0.90

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.