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Each of the Following Statements Violates a Concept or Convention

Question 132

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Each of the following statements violates a concept or convention of accounting.Write the letter that match with each statement to the concept or convention violated.

Premises:
A small company purchases a $50,000 computer to save $3,000 per year in bookkeeping wages.
When management is unsure of which estimates to use in a given situation,the estimate resulting in the largest net income is always used.
In 20x5,a company uses straight-line depreciation and in 20x6 the company uses declining-balance depreciation.
A note to the financial statements indicating a change in inventory methods is omitted.
A small company expenses all expenditures under $10,000.
Responses:
Materiality
Cost-benefit
Conservatism
Consistency
Full disclosure

Correct Answer:

A small company purchases a $50,000 computer to save $3,000 per year in bookkeeping wages.
When management is unsure of which estimates to use in a given situation,the estimate resulting in the largest net income is always used.
In 20x5,a company uses straight-line depreciation and in 20x6 the company uses declining-balance depreciation.
A note to the financial statements indicating a change in inventory methods is omitted.
A small company expenses all expenditures under $10,000.
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