Consider the Following Information You Are an Accountant for Both Firms and Would Like

question 52

Multiple Choice

Consider the following information
$$\begin{array} { | l | r | r | } \hline & \text { Mosman Ltd } & \text { Manly Ltd } \\\hline \text { Sales } & \$ 5000000 & \$ 50000 \\\hline \text { Cost and expenses } & 4000000 & 40000 \\\hline \text { Net profit } & 1000000 & 10000 \\\hline & & \\\hline \text { Impairment loss } & 40000 & 5000 \\\hline\end{array}$$
You are an accountant for both firms and would like to determine whether the impairment loss is material or not.Which of the following statement(s) is/are correct?

• A) The impairment loss for both firms is material.
• B) The impairment loss for Manly Ltd is material.
• C) The impairment loss for Mosman Ltd is material.
• D) The impairment loss for both firms is immaterial.

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Definitions:

Competitive

Characterized by the existence of competition; striving to gain or win something by defeating or establishing superiority over others.

Compounded Continuously

The mathematical limit that investment interest can grow to when it is compounded infinitesimally.

Borrowing Money

The act of obtaining funds from another party, often a financial institution, under the agreement to pay back with interest.

Nominal Rate

The interest rate stated on a loan or investment agreement, not taking into account the effects of inflation, and often differing from the real rate of interest.