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salantis [7]
4 years ago
15

Mega Loan Company has very stringent credit requirements and, accordingly, has negligible losses from uncollectible accounts. Th

e company's independent accountants did not protest when, contrary to GAAP, the company recorded bad debt expense only when specific accounts were determined to be uncollectible, rather than use an allowance for uncollectilble accounts. The concept demonstrated is:
a. Comparability
b. Faithful representation
c. Materiality
d. Consistency
Business
1 answer:
Marianna [84]4 years ago
7 0

Answer:

The correct answer is letter "C": Materiality.

Explanation:

The Materiality principle refers that one of the accounting standards can be left behind only if it has an irrelevant impact on the financial statements. According to the Generally Accepted Accounting Principles (GAAP) only when an item is "<em>immaterial</em>", provisions for the transaction derived from that item are not mandatory. But, the definition of what is material and immaterial is not provided by the GAAP, then, it relies on the judgment of the accountant.

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I'll just put out issues.

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3 years ago
Big Tommy Corporation is a local grocery store organized seven years ago as a corporation. The bookkeeper prepared the following
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Answer:

                        Big Tommy Corporation

      Profit and Loss for the year ended December 31

Sales                                                                         404,000

Cost of Goods Sold                                                 279,000

Gross Profit                                                               125,000

<em>Operating Expenses:</em>

Salaries and Wages Expense                   58,000

Office Expenses                                         16,000

Travel Expenses                                           1,000    75,000

Operating Income:                                                     50,000

Non-Operating Expenses

Income Tax Expense                                 15,000     15,000

Net Income                                                                 35,000

Explanation:

Multistep income statement makes a clear distinction on Operating Incomes and Expenses and Non-Operating Incomes and Expenses

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Non-Operating Incomes and Expenses do not relate to the Primary activities of the firm.They occur as a result of secondary activities.

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