ACCTNG 112 Answers For Chapter 2
ACCTNG 112 Answers For Chapter 2
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2. The qualitative characteristics of useful
information apply only to the financial
information provided in the financial
statements.
5. Materiality judgements apply only to items
that are recognized but not to those that
ANSWER: FALSE unrecognized.
EXPLANATION: qualitative characteristics
apply to information in the financial statements
as well as to financial formation provided in ANSWER: FALSE
other ways.
EXPLANATION: unrecognized are
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3. According to IFRS Practice Statement 2
Making Materiality Judgements, cost is an The entity makes this assessment by
important consideration when making considering not only the size of the impact it
materiality judgements. recognizes in its primary financial statements
but also any unrecognized items that could
ultimately affect primary users’ overall
perception of the entity’s financial position,
ANSWER: FALSE
financial performance and cash flows (e.g.
EXPLANATION: cost is an important contingent liabilities or contingent assets)
consideration when making materiality
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judgements but not just cost but also benefits.
https://www.sekoyen.com/PS02.p
The IASB identifies the information needs of a
wide range of primary users and considers the
balance between the benefits to be derived from 6. The more significant the qualitative factors,
the information and the cost of producing it. the lower the quantitative thresholds will be.
Thus, an item with a zero amount can be
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material in light of qualitative thresholds.
ANSWER: TRUE
EXPLANATION: if an item is
quantitatively material, the entity need not
reassess it on the basis of qualitative factors.
Iif an item is quantitatively not material, the
entity needs to reassess it on the basis of
qualitative factors.
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https://www.sekoyen.com/PS02.pdf (p.g. 14) PROBLEM # 3 (MULTIPLE CHOICE)
P.G. 47
1. According to the Conceptual Framework,
these are the qualitative characteristics that
8. The Conceptual Framework and the make information useful to users.
Standards specify a uniform quantitative
threshold for materiality.
ANSWER: A - fundamental
EXPLANATION:
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EXPLANATION:
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the sense that it necessarily requires at least
two items.
EXPLANATION:
ANSWER: C – probability of the expected
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inflows of economic benefits from the asset
ANSWER: C – verifiability
EXPLANATION:
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8. Entity A is assessing whether an item meets 12. Which of the following does not meet the
the definition of a financial statement definition of an asset?
EXPLANATION: Understandable
Answer: C
Answer: C
ANSWER: B – entity A’s treatment for the asset
is acceptable. The asset is referred to as an EXPLANATION: General purpose financial
‘unrecognized’ asset. reporting deals with providing
information that caters to the
EXPLANATION: Even if an item that meets the common needs of the primary users.
definition of an asset or liability is Financial reports do not and
not recognized, information about cannot provide all the information
that item may still need to be needs of primary users. These
disclosed in the notes. In such case, users will need to consider other
it is referred to as unrecognized resources for their other
asset/liability. information needs such as general
economic conditions and
If one or both of the foregoing
expectations.)
factors result to non-recognition,
information about the
unrecognized asset or liability may
still need to be provided in the 3. These are users of financial information
notes. Despite the presence of one who are not in a position to require a
or both of the foregoing factors, an reporting entity to prepare reports
asset or liability may nonetheless tailored to their particular needs.
be recognized if this provides
Answer: A
relevant information.
EXPLANATION:
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EXPLANATION:
7. Which of the following is an example of
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a qualitative factor used in making
materiality judgements?
TERMS
THRESHOLDS
9. Which of the following statements about
The level at which something is affected by a
the concepts in the Conceptual
particular rule or belongs in a particular class, or the
Framework is least accurate?
level of money earned or income.