Indicate the accounting principle that provides the most conservative measure of earnings in each of the following
Question:
Indicate the accounting principle that provides the most conservative measure of earnings in each of the following cases.
a FIFO, LIFO, or weighted-average cost-flow assumption for inventories during periods of rising prices.
b FIFO, LIFO, or weighted-average cost-flow assumption for inventories during periods of declining prices.
c Lower-of-cost-or-market or equity method of accounting for long-term investments in the securities of unconsolidated subsidiaries where dividends declared by the subsidiary are less than its earnings.
d Sum-of-the-years'-digits or straight-line depreciation method during the first one-third of an asset's life.
e Sum-of-the-years-digits or straight-line depreciation method during the last one-third of an asset's life.
f Deferral or flow-through method of accounting for the investment tax credit in the year qualifying assets are acquired.
g The valuation of inventories at acquisition cost or lower of cost or market.
h Lower-of-cost-or-market or equity method of accounting for long-term investments in the securities of unconsolidated subsidiaries where the investee realizes net losses and does not pay dividends.
i Purchase or pooling-of-interests method of accounting for corporate acquisitions where the market value of the consideration given by the acquiring company exceeds the book value of the acquired company's net assets.
j Effective-interest or straight-line method of amortizing bond premium in the first year that bonds are outstanding.
k Effective-interest or straight-line method of amortizing bond discount in the first year that bonds are outstanding.
Step by Step Answer:
Financial Accounting An Introduction To Concepts Methods And Uses
ISBN: 9780030452963
2nd Edition
Authors: Sidney Davidson, Roman L. Weil, Clyde P. Stickney