Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Question
Chapter 2, Problem 14C
To determine
Evaluate the following the number statements:
- List out the fallacies, half-truths, circular reasoning, erroneous comments or conclusion and inconsistencies in the given statements.
- Explain the basis or authority by which the item listed can be considered as fallacies, half-truths, circular reasoning, erroneous, comments or conclusion and also indicate the statement that will be considered as correct when the statement or portion is merely out of context.
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1)Development of accounting principles.
Presented below are two independent, unrelated statements regarding the formulation of generally accepted accounting principles. Each statement contains some incorrect or debatable statement(s).
Statement I
The users of financial accounting statements have coinciding and conflicting needs for statements of various types. To meet these needs, and to satisfy the financial reporting responsibility of management, accountants prepare different sets of financial statements for different users.
Statement II
The FASB should be responsive to the needs and viewpoints of the entire economic community, not just the public accounting profession. The FASB therefore will succeed because it will deal effectively with all interested groups.
Instructions
Evaluate each of the independent statements and identify the areas of fallacious reasoning in each. Explain why the reasoning is incorrect. Complete your discussion of each statement before proceeding to…
Accounting information provides useful information about business transactions and events. Those whoprovide and use financial reports must often select and evaluate accounting alternatives. The Conceptual
Framework examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may
necessitate trade-offs or sacrifices among the characteristics of useful information.For each of the following pairs of information characteristics, provide a hypothetical situation in which inwhich one of the characteristics may be sacrificed in return for a gain in the other. Explain the situationand criterion should be used to evaluate trade-offs between information characteristics? give your opinionsthati) Relevance and faithful representation.ii) Comparability and consistency.iii) Relevance and consistency.iv) Relevance and understandability.
1.Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position.
(a) Accounting rule-making that relies on a body of concepts will result in useful and consistent pronouncements. True
(b) General-purpose financial reports are most useful to company insiders in making strategic business decisions. False
(c) Accounting standards based on individual conceptual frameworks generally will result in consistent and comparable accounting reports. False
(d) Capital providers are the only users who benefit from general-purpose financial reporting. False
(e) Accounting reports should be developed so that users without knowledge of economics and business can become informed about the financial results of a company. False
(f) The objective of financial reporting is the foundation from which the other aspects of the framework logically result. True
Chapter 2 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 2 - Prob. 1GICh. 2 - Prob. 2GICh. 2 - How do accounting concepts, principles, standards,...Ch. 2 - Prob. 4GICh. 2 - Prob. 5GICh. 2 - Prob. 6GICh. 2 - What is the Objective: Useful Information about...Ch. 2 - Prob. 8GICh. 2 - Prob. 9GICh. 2 - Define (a) return on investment, (b) risk, (c)...
Ch. 2 - Prob. 11GICh. 2 - Prob. 12GICh. 2 - Prob. 13GICh. 2 - Prob. 14GICh. 2 - Prob. 15GICh. 2 - Prob. 16GICh. 2 - What is the cost constraint, and how does it...Ch. 2 - Prob. 18GICh. 2 - Prob. 19GICh. 2 - Prob. 20GICh. 2 - Prob. 21GICh. 2 - Prob. 22GICh. 2 - Prob. 23GICh. 2 - Describe accrual accounting. What are the...Ch. 2 - What drives the timing of revenue recognition?...Ch. 2 - Prob. 26GICh. 2 - Prob. 27GICh. 2 - Prob. 28GICh. 2 - Prob. 29GICh. 2 - The information provided by financial reporting...Ch. 2 - Which of the following is considered a constraint...Ch. 2 - According to Statement of Financial Accounting...Ch. 2 - Prob. 4MCCh. 2 - Prob. 5MCCh. 2 - Prob. 6MCCh. 2 - Accruing net losses on obsolete inventory is an...Ch. 2 - Prob. 8MCCh. 2 - An accrued expense is an expense: a. incurred but...Ch. 2 - Prob. 10MCCh. 2 - Prob. 1ECh. 2 - Prob. 2ECh. 2 - Prob. 1CCh. 2 - Prob. 2CCh. 2 - Prob. 3CCh. 2 - Prob. 4CCh. 2 - An accountant must be familiar with the concepts...Ch. 2 - Prob. 6CCh. 2 - Prob. 7CCh. 2 - Prob. 8CCh. 2 - Prob. 9CCh. 2 - Accruals and Deferrals Generally accepted...Ch. 2 - Prob. 11CCh. 2 - Prob. 12CCh. 2 - You have been hired as an accounting consultant by...Ch. 2 - Prob. 14C
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Similar questions
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- That a business may only report activities on financial statements that are specifically related to company operations, not those activities that affect the owner personally, is known as which of the following? A. separate entity concept B. monetary measurement concept C. going concern assumption D. time period assumptionarrow_forwardAccounting information provides useful information about business transactions and events. Those who provide and use financial reports must often select and evaluate accounting alternatives. The FASB statement on qualitative characteristics of accounting information examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may necessitate trade-offs or sacrifices among the characteristics of useful information. Instructions a. Describe briefly the following characteristics of useful accounting information. 1. Relevance. 2. Faithful representation. 3. Understandability. 4. Comparability. 5. Consistency. b. For each of the following pairs of information characteristics, give an example of a situation in which one of the characteristics may be sacrificed in return for a gain in the other. 1. Relevance and faithful representation. 2.…arrow_forwardWhich one of the following statements is not correct regarding financial accounting and management accounting ? a . None of the given answers b. Financial accounting information emphasize supporting decisions that affect the future unlike management accounting information , which focus on the consequences of past activities of the organization . c. Financial accounting needs to follow specific set of rules called accounting standards unlike Management accounting d. Both financial accounting and management accounting involve the use of accounting information . e. Financial accounting reports need to be audited to verify their accuracy unlike management accounting reports which do not need to be audited .arrow_forward
- Which of the following is not an advantage of accounting standards? Select one: a. All of the given answers are correct. b. It reduces the reliability of financial statements. c. It helps to attain uniformity in accounting. d. It provides guidance on the content and presentation of financial statements.arrow_forward(Usefulness, Objective of Financial Reporting, Qualitative Characteristics) Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting yourposition.(a) The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability.(b) Relevant information only has predictive value, confirmatory value, or both.(c) Information that is a faithful representation is characterized as having predictive or confirmatory value.(d) Comparability pertains only to the reporting of information in a similar manner for different companies.(e) Verifiability is solely an enhancing characteristic for faithful representation.(f) In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities.arrow_forwardPROBLEM Below is a list of the qualitative characteristics identified in FASB Statement of Financial Accounting Concepts No. 2. Following the list is a series of descriptive phrases. a. feedback value b. relevance c. decision usefulness d. reliability e. comparability f. predictive value g. varifiability h. consistency i. representational faithfulness j. timeliness k. neutrality _____ 1. When information can make a difference in a decision. _____ 2. Making information available when it is needed. _____ 3. When accounting policies and procedures are unchanged from period ro period. _____ 4. When information is verifiable and neutral. _____ 5. Occurs when the measurement results can be duplicated. _____ 6. The overall qualitative characteristics accounting information should possess. _____ 7. When information enables decision makers to confirm prior expectations. _____ 8. When accounting information is reported the same way by different companies. Required: Match each characteristic…arrow_forward
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