Accounting Conceptual Framework.
1)For each of the following situations, indicate whether you agree or disagree with the accounting procedure. If you agree, identify the accounting assumption (Level 3), Principal (Level 3), Or Qualitative Characteristic (Level 2) that is applied, If you disagree, What was the assumption (level 3), Priniciple (Level 3), Or qualitative Characteristic (level 2) that was violated. Only one answer per statement.
A) Honker Corp purchased two calculators for 27.50 each. The cost of the calculators was expensed even though they had four year useful life.
B) Knight Corp. received an order for the sale of 500 lawnmowers at $250 each. The customer paid knight Corp $125,000 on Jan 15th. However, Knight Corp did not recognize any revenue until April 30th, the date the lawnmowers were delivered.
C) Lion Corp. purchased a van having a 3 year life. The cost of the van is being expensed over the life of the van through depreciation.
D) Bomber Corp included a note in its financial statements that describe a lawsuit against the corp.
2) The CEO of Maverick Corp stated ” There must be public confidence that the standard-setting system is credible, that the selection of FASB board members is based on merit and not the influence of special interests. What specific level 2 characteristic is implied in the CEO’s statement?
