Presented below are three different transactions related to materiality. Explain whether you would 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 unusual 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 $2,500 on the basis that it is immaterial. The company has followed this practice for a number of years.
Presented below are three different transactions related to materiality. Explain whether you would 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
b. Hindi Co. has an unusual 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 $2,500 on the basis that it is immaterial. The company has followed this practice for a number of years.
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