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:

Transverse Section

A transverse section refers to a cut made along a plane that divides the body or organ horizontally into upper and lower parts.

Superior Vena Cava

A big vein that transports blood lacking oxygen from the body's upper section to the right atrium of the heart.

Pulmonary Artery

The blood vessel that transports blood from the heart's right ventricle to the lungs to receive oxygen.

Pulmonary Vein

A vein that carries oxygenated blood from the lungs back to the left atrium of the heart.