Which of the Following Items Would Most Likely Be a Violation

question 57

Multiple Choice

Which of the following items would most likely be a violation of the materiality constraint?

• A)A company did not separately report an unusual gain of $50, 000.Its income from operations was $5, 000, 000.
• B)A company having reported total assets of $20, 000, 000 immediately expensed the purchase of 20 pencil sharpeners that have an estimated useful life of three years.
• C)A $25, 000 illegal bribe by an executive of the company to a foreign official was not separately disclosed in the annual report.
• D)A $5, 000 expenditure to improve a building that originally cost $5, 000, 000 was immediately expensed.

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Definitions:

Accounts Payable

Liabilities owed by a business to its suppliers or creditors for goods or services received but not yet paid for.

T-account

A graphical representation of a general ledger account that outlines the effects of transactions on account balances.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet.

Credit

A financial agreement where a borrower receives something of value now and agrees to repay the lender at a later date, often with interest.