1. Discuss the concept of materiality in accounting and how it affects financial reporting. Provide an example of a material transaction and calculate its effect on a company's financial statements for a company with the following information:

• Assets of $1,000,000 at the beginning of the year
• Liabilities of $500,000 at the beginning of the year
• Revenue of $800,000 for the year
• Expenses of $600,000 for the year

2. Explain the concept of consistency in accounting and how it affects financial reporting. Analyze the effect of a change in accounting policy on a company's financial statements for a company with the following information:

• Assets of $2,000,000 at the beginning of the year
• Liabilities of $1,000,000 at the beginning of the year
• Revenue of $1,500,000 for the year
• Expenses of $1,200,000 for the year
• Depreciation expense of $100,000 for the year
• The company previously used the straight-line method of depreciation, but now it intends to switch to the declining balance method.