QUESTIONS 1. What is a conceptual framework? Why is a conceptual frameworke ry in financial accounting? 2. What is the primary objective of financial reporting? 3. What is meant by the term qualitative characteristics of accounting informat "? 4. Briefly describe the two fundamental qualities of useful accounting information 62 Chapter 2 Conceptual Framework for Financial Reporting 5. How is materiality for immateriality) related to the proper presentation of financial statements? What factors and mesures should be considered in essing the material ity of a misstatement in the presentation of a financial sament? 6. What are the enhancing qualities of the qualitative charace teristics? What is the role of enhancing qualities in the conceptual framework? 7. According to the FASB conceptual framework, the obje tive of financial reporting for business enterprises is based on the needs of the users of financial statements. Explain the level of sophistication that the Board assumes about the users o financial statements 8. What is the distinction between comparability and consistency? 9. Why is it necesary to develop a definitional framework for the basic elements of accounting? 10. Expenses losses, and distributions to owners are all decreases in net assets. What are the distinctions among 20. What is a performance obligation and how is used to determine when revenue should be recognized 21. What are the five steps to determine the proper time to recognize revenue? 22. Selane Eatery operates a catering service specializing in business luncheons for large corporations Selane requires customers to place their orders 2 weeks in advance of the scheduled v s Selane Wills its cus tomers on the tenth day of the month following the date of service and requires that payment he made within 30 days of the billing date Conceptually, when should Selane recognize revenue related to its catering service? 23. Mogilny Company paid $135.000 for a machine. The Accumulated Depreciation Equipment account has a balance of $46,500 at the present time. The company could sell the machine today for SISUADO. The company pres dent believes that the company has a right to this gain." What does the president mean by this statement? Do you 11. Revenue gains, and investments by owners are all increases in net assets. What are the distinctions among 12. What are the four basic assumption that underlie the financial accounting structure? 13. The life of a business is divided into specific time periods, wally a year to measure results of operations for each such time period and to portray financial conditions at the end of each period This practice is based on the accounting assumption that the life of the business consists of a series of time periods and that it is possible to measure accurately the results of operations for each period. Comment on the validity and necessay of this assumption (b) What has been the effect of this practice on account ing? What is its relation to the accrual system? What influence has it had on accounting entries and methodology? 14. What is the basic counting peblem created by the man etary unit assumption when there is significant inflation? What appears to be the FASE position on a stable mone tary unit? 15. The chairman of the board of directors of the company for which you are chief accountant has told you that he has little use for accounting figures based on historical cost He believes that replacement values are of far more nificance to the board of directors than t o costs. Present some arguments to convince him that accounting data should still be used on historical cost 16. What is the definition of fair value 17. What is the fair value option Explain how use of the fair value option reflects application of the fair value principle 18. Briefly describe the fair value hierarchy 19. Explain the revenue recognition principle. 24. Three expense recognition methods a cting cause and effect, systematic and rational a ction and me diate recognition) were discussed in the text under the expense recognition principle Indicate the bas e of each of these expense recognition methods and give two examples of each 25. Stam i na A Comas Ne dentities four characteristics that an item must have before it is nec ognized in the financial statements. What are these four characteristics? 26. rictly describe the types of information concerning financial position, income, and cash flows that might be provided (a) within the main body of the financial state ments, (b) in the notes to the financial statements, as supplementary informatice 27. In anuary 2018. Laneway Inc doubled the amount of its outstanding stack by welling on the market an additional 10,000 shares to finance an expansion of the business. You pou that this informative shown by aften balance sheetasof December 31, 2017. The president objects, claiming that this sale took place after December 31, 2017 and therefore should not be shown Explain your position 28. Describe the major constantine in the presentation of accounting information 29. What are some of the cost of providing accounting info mation? What are scene of the benefits of accounting information? Describe the benefit to that should be considered when new accounting standards are being proposed 30. The treasure of Landowska Cahas heard that com Nation is a doctrine that is followed in accounting and therefore, proposes that everal policies be followed that are conservative in nature State your opinion with respect to each of the policies listed (a) The company gives a year warranty to its custom- ers on all products sold. The estimated warranty costs