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GROUPWORK (Accounting Principles and Assumptions—Comprehensive) Presented below are a number of business transactions that occurred during the current year for Gonzales, Inc. Instructions In each of the situations, discuss the appropriateness of the journal entries in terms of generally accepted accounting principles. (a) The president of Gonzales, Inc. used his expense account to purchase a new Suburban solely for personal use. The following journal entry was made.Miscellaneous Expense 29,000Cash 29,000 (b) Merchandise inventory that cost $620,000 is reported on the balance sheet at $690,000, the expected selling price less estimated selling costs. The following entry was made to record this increase in value.Inventory 70,000Sales Revenue 70,000 (c) The company is being sued for $500,000 by a customer who claims damages for personal injury apparently caused by a defective product. Company attorneys feel extremely confident that the company will have no liability for damages resulting from the situation. Nevertheless, the company decides to make the following entry.Loss from Lawsuit 500,000Liability for lawsuit 500,000 (d) Because the general level of prices increased during the current year, Gonzales, Inc. determined that there was a $16,000 understatement of depreciation expense on its equipment and decided to record it in its accounts. The following entryDepreciation Expense 16,000Accumulated Depreciation Equipment 16,000 (e) Gonzales, Inc. has been concerned about whether intangible assets could generate cash in case of liquidation. As a consequence, goodwill arising from a purchase transaction during the current year and recorded at $800,000 was written off as follows. (f) Because of a “fire sale.” equipment obviously worth $200,000 was acquired at a cost of $155,000. The following entry was made.Equipment 2000Cash 155,000Sales Revenue 45,000
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Intro to Financial Accounting Anonymous Student 7 months ago The two fundamental qualities that make accounting information useful for decision making are
a. comparability and timeliness. b. materiality and neutrality. c. relevance and faithful representation. d. faithful representation and comparability. All replies Expert Answer 7 months ago The correct answer is c. relevance and faithful representation Explanation : All the qualities mentioned above apply to the accounting information but the fundamental qualities that make an accounting information useful for decision making are relevance and faithful representation. The accounting information so gathered needs to be appropriate and useful and also correct at the same time so that the users of financial statements are able to make concrete decisions. Related Answered QuestionsHow Expert Q&A works: Ask your study questions to our Experts. Receive an answer explained step-by-step. Get your answer as fast as 30 minutes. What are the fundamental qualities of accounting information?Qualitative characteristics of accounting information that impact how useful the information is:. Verifiability.. Timeliness.. Understandability.. Comparability.. What are the two user specific qualities of accounting information?The fundamental qualities of accounting information are relevance and reliability, also known as representational faithfulness. If accounting data is to be relevant and useful to decision makers if must be timely.
What are the two main financial statements used for decision making?Financial accounting is a way for businesses to keep track of their operations, but also to provide a snapshot of their financial health. By providing data through a variety of statements including the balance sheet and income statement, a company can give investors and lenders more power in their decision-making.
What are the two uses of accounting information?Various Government agencies and departments like Registrar of Companies, Company Law Board and Tax Authorities, etc. use accounting information. They not only require it as a basis for tax assessment but also in evaluating how well various businesses are operating under law related requirements.
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What are the two fundamental qualities that make accounting information useful for decision making?
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