Question: Presented below are three different transactions related to materiality Explain whether

Presented below are three different transactions related to materiality. Explain whether you would classify these transactions as material.
(a) Blair Co. has reported a positive trend in earnings over the last 3 years. In the current year, it reduces its bad debt allowance to ensure another positive earnings year. The impact of this adjustment is equal to 3% of net income.
(b) Hindi Co. has an extraordinary gain of $3.1 million on the sale of plant assets and a $3.3 million loss on the sale of investments. It decides to net the gain and loss because the net effect is considered immaterial. Hindi Co.’s income for the current year was $10 million.
(c) Damon Co. expenses all capital equipment under $25,000 on the basis that it is immaterial. The company has followed this practice for a number of years.



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  • CreatedMay 04, 2012
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