Chris oversees the accounting for River City, Inc.\'s machinery purchases. Compa

Question

Chris oversees the accounting for River City, Inc.'s machinery purchases. Company policy requires that all expenditures over than $2,000 (1% of total expenditures) must be capitalized. those less than $2,000 are expensed. Chris is under pressure by his boss, the controller, to report high earnings. Thus he adds a $1350 and $950 expenditure together and then records a capital expenditure for $2500. Which of the following reasons and rationalizations might Chris use for his action? O Materiality O Standard industry practice O One-time request O Representational correctness

Explanation / Answer

Option (A) Materiality is correct.

Here, Chris will be using the Materiality concept. As per this concept, an item will be recorded either as capital expenditure or revenue expenditure, based upon its material significance. Chris, is recording the item as capital expenditure by combining the two expenditures and making them material enough to go past beyond the threshold limit of $2000 given to him.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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