Each of the Following Statements Is Justified by a Concept

question 82

Essay

Each of the following statements is justified by a concept or convention of accounting. Write the letter in the blank next to each statement corresponding to the concept or convention involved.
a. Consistency
b. Materiality
c. Conservatism
_____ 1. This convention best enhances comparability of financial statements between years.
_____ 2. A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.
_____ 3. A company forgoes hiring another full-time accountant, which would add only slightly to the financial statements' accuracy.
_____ 4. A company uses lower-of-cost-or-market to value inventory.
_____ 5. A large company rounds its financial statement figures to the nearest $10,000.
d. Full disclosure
e. Cost-benefit

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Definitions:

United Autoworkers

A labor union representing workers in the automobile manufacturing industry in the United States and Canada.

Honda, Toyota, Nissan

Major Japanese multinational automotive manufacturers known for their vehicles' reliability and innovation.

Reserve Clause

A term used in sports contracts allowing a team to retain the rights to a player after the contract expires.

Monopsony Power

A market condition where there is only one buyer for many sellers, giving the buyer significant control over prices and terms.