Question

The qualitative characteristics outlined in the FASB’s conceptual framework include:


Consider the following independent situations.
1. In deciding whether to invest in Southwest Airlines or American Airlines, investors evaluate the companies’ income statements. __________
2. To provide the most reliable information about future sales, Walmart’s management uses an appropriate process to estimate the decline in inventory value each year. _______
3. In deciding whether to loan money, Wells Fargo uses balance sheet information to forecast the probability of bankruptcy. __________
4. IBM is required to issue public financial statements within 60 days of its year-end. __________
5. Employees of Starbucks can use the company’s financial statements to analyze the efficiency with which management has conducted operations over the past year. ______
6. When first requiring firms to prepare a statement of cash flows, the FASB’s intent was not to discourage or promote investment in the automobile industry. __________
7. When Harley-Davidson reports revenue for the year, the amount includes sales not only in the United States but also those outside the United States. __________
8. The amount of total assets reported by General Mills can be substantiated by its auditors. __________
9. The Cheesecake Factory prepares its balance sheet in a clear format using basic accounting terminology to allow users to easily comprehend the company’s assets, liabilities, and stockholders’ equity. __________
10. Target prepays $600 to rent a post office box for the next six months and decides to record the entire payment to Rent expense (instead of Prepaid rent) in the current month. __________

Required:
Determine which qualitative characteristic best applies to each situation. Each of the 10 characteristics is used once and onlyonce.


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  • CreatedJuly 15, 2014
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