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Cost constraint on useful financial reporting

04/10/2021 Client: muhammad11 Deadline: 2 Day

LO 1 Qualitative Characteristics and Accounting Conventions E2A. CONCEPT Each of the statements that follow violates one or more accounting con- cepts. State which of these selected qualitative characteristics and accounting conventions- relevance, faithful representation, comparability, verifiability, timeliness, understandability, cost constraint, consistency, materiality, conservatism, or full disclosure-is (are) violated. 1. A company changes its method of accounting for depreciation. 2. The asset account for a pickup truck still used in the business is written down to what the truck could be sold for, even though the carrying value under conventional depreciation methods is higher. 3. A series of reports that are time-consuming and expensive to prepare are presented to the owner cach month, even though they are never used. 4. The company in 1 does not indicate in the financial statements that the method of depreciation was changed, nor does it specify the effect of the change on net income. 5. A company's new office building, which is built next to the company's existing factory, is debited to the factory account because it represents a fairly small dollar amount in relation to the factory. 6. Information is presented in a way that is not useful to users. 7. A transaction is recorded that does not represent the substance of the economic event. 8. Information is presented in a way that is confusing to users. 9. Similar transactions are recorded using different accounting principles. 10. Information is reported long after the economic events they represent. 11. Various experts come up with widely different estimates of an amount.

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