Evaluating Financial Accounting Information In its most recent income statement, the Electronic Shop reported the following information about its revenues for the past two years:

a. You are considering investing in the Electronic Shop, but are concerned that several recent articles have indicated there may be a nationwide slowdown in sales of computers and related equipment. Does the information on the Electronic Shop’s revenue for 2001 support or contradict the information provided in the articles?

b. What characteristics of accounting information should provide assurance to the financial statement reader that the revenue information provided by the Electronic Shop can be relied upon?

c. Would your ability to evaluate the Electronic Shop’s revenues be changed if the company reported revenue in only two categories, as shown below? How?

Transcribed Image Text:

Revenues: 2001 2000 Computers and related equipment $120,000 $200,000 Computer software Repairs and service Total revenue 235,000 135,000 85,000 45,000 $440,000 $380,000