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SFAC No. 8 identifies the qualitative characteristics that make accounting information useful. Presented below are a number of questions related to these qualitative characteristics and underlying constraint. (a) (b) (c) Sprull Inc. switches from FIFO to average cost to FIFO over a 2-year period. Which qualitative characteristic of accounting information is not followed? Assume that the profession permits the savings and loan industry to defer losses on investments it sells because immediate recognition of the loss may have adverse economic consequences on the industry. Which qualitative characteristic of accounting information is not followed? (Do not use relevance or faithful representation) The chairman of the SEC at one time noted, "If it becomes accepted or expected that accounting principles are determined or modified in order to secure purposes other than economic measurement, we assume a grave risk that confidence in the credibility of our financial information system will be undermined. Which qualitative characteristic of accounting information should ensure that such a situation will not occur? (Do not use faithful representation) What are the two fundamental qualities that make accounting information useful for decision-making? Davidson Inc does not issue its first quarter report until after the second quarter's results are reported. Which qualitative characteristic of accounting is not followed? (Do not use relevance.) Identify the pervasive constraint developed in the conceptual framework. Predictive value is an ingredient of which of the two fundamental qualities that make accounting information useful for decision-making purposes? Rubin Company is the only company in its industry to depreciate its plant assets on a straight-line basis. Which qualitative characteristic of accounting Information may not be followed? (d) le) S (8) (h) The ledger of Wildhorse Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared. Credit Debit $3,348 2,583 22.940 Prepaid Insurance Supplies Equipment Accumulated Depreciation-Equipment Notes Payable Unearned Rent Revenue Rent Revenue Interest Expense Salaries and Wages Expense $8.172 18.030 3,600 64,620 -0- 13,670 An analysis of the accounts shows the following 1. 2 3. The equipment depreciates $259 per month. One-third of the unearned rent was recognized as revenue during the quarter. Interest of $520 is accrued on the notes payable. Supplies on hand total $640. Insurance expires at the rate of $279 per month 4. 5. Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expenses. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter for the amounts.)
