Font bccDe | 1 Normal 1 No Spaci... Heading 1 Heading 2 Title Paragraph BE2- Presented below are three different transactions related to materiality. Explain whether you would Styles classify these transactions as material. (a) Blair Co. has reported a positive trend in earnings over the last 3 years. In the current year it reduces its bad debt allowance to ensure another positive earnings year. The impact of this adjustment is equal to 3% of net income. (b) Hindi Co has an extraordinary gain of $3.1 million on the sale of plant assets and a $3.3 million loss on the sale of investments. It decides to net the gain and loss because the net effect is considered immaterial. Hindi Co. s income for the current year was $10 million (c) Damon Co. expenses all capital equipment under $25.000 on the basis that it is immaterial The company has followed this practice for a number of years. ngs Times New Rom - 12 AA Aamy EET B 21 Font AaBbc&D 1 Normal AaBbca AaBb AaBbcc A 1 No Spac. Heading1 Heading 2 Paragraph Styles BE2-4 Identify which qualitative characteristic of accounting information is best described in each item below. Do not use relevance and faithful representation.) (a) The annual reports of Best Buy Co. are audited by certified public accountants (6) Black & Decker and Cannondale Corporation both use the FIFO cost flow assumption (C) Starbucks Corporation has used straight-line depreciation since it began operations (d) Motorola issues its quarterly reports immediately after each quarter ends. Styles BE2-3 Discuss whether the changes described in each of the cases below require recognition in the CPA'S audit report as to consistency.(Assume that the amounts are material.) (a) The company changed its inventory method to FIFO from weighted average, which had been used in prior years. (b) The company disposed of one of the two subsidiaries that had been included in its consolidated Statements for prior years. (c) The estimated remaining useful life of plant property was reduced because of obsolescence