A Firm's Accounting Policy Is to Immediately Expense the Cost

question 128

Multiple Choice

A firm's accounting policy is to immediately expense the cost of metal wastebaskets it purchases for use by its employees at their desks. The total cost of wastebaskets in any year is $1,000 and the firm has $6 billion in total assets. The firm expects the wastebaskets to last indefinitely. The firm

• A) Is violating GAAP
• B) Is invoking the materiality constraint
• C) Is invoking the conservatism constraint
• D) Is violating the relevance principle
• E) None of these answers are correct.

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Definitions:

Industrial Revolution

A period of major industrialization from the late 18th to early 19th centuries that transformed primarily agrarian, rural societies into industrialized, urban ones.

Rural Activities

Economic, social, and recreational activities that take place in countryside areas, often related to agriculture, forestry, or small-scale manufacturing.

Not-for-Profit Organizations

Organizations that function not to generate profit but primarily concentrate on objectives related to social, educational, or charitable activities.

Public Service

Services provided by the government to its citizens, often focusing on essential services like healthcare, education, and security.