Identification of Foundational Accounting Principles and Qualitative Characteristics Presented Below

question 57

Essay

Identification of foundational accounting principles and qualitative characteristics Presented below are a number of accounting procedures and practices followed by January Corp. For each of these items, list the assumption, principle, or qualitative characteristic that is NOT being followed.
1. Because the company's income is low this year, January switched from accelerated depreciation to straight-line depreciation.
2. The president of January believes it is foolish to report financial information on a yearly basis. She believes that financial information should be disclosed only when significant new information is available related to the company's operations.
3. January decides to establish a large loss and related liability this year because of the possibility that it may lose a pending lawsuit. The possibility of loss is considered remote by the corporation's lawyers.
4. One of the corporation's executives purchased a new home computer for personal use with company money, charging Miscellaneous Expense.
5. The corporation has not established an Allowance for Doubtful Accounts, even though there are a significant number of their accounts that are either slow paying or may not pay their debts in full.

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Definitions:

Upward Sloping

refers to a graph line that shows an increase in one variable as another variable increases, commonly seen in supply curves.

Budget Constraint

An economic model that represents all the combinations of goods and services a consumer can afford given their income and prices.

Opportunity Cost

The value of the best alternative forgone as a result of choosing a particular action or decision.

Pineapples

A tropical fruit with a tough outer shell, sweet and juicy interior, and an ability to thrive in warm climates.