Lewis and Clark Expedition essays

Lewis and Clark Expedition essays Big Car Companys treatment of its plant and equipment illustrates the historical cost principle. This principle requires the use of the exchange price at the time a transaction occurs to be the basis for initially recording assets. When Big Car capitalizes the cost of plant and equipment, it is debiting the asset account for the initial cost. Big Car uses the matching principle when it allocates the cost over the future periods. This principle states that expenses are associated with the revenues they helped the firm to earn. Big Car does that when it allocates cost over the future periods that benefit from the plant and equipment. The qualitative characteristic of verifiability is illustrated by the fact that Big Car Companys CPA firm agrees that Big Cars procedures are totally in compliance with generally accepted accounting principles (GAAP). Verifiability means that two or more accountants looking at the same information would arrive at approximately the same result. Big Car is using materiality when it expenses plant and equipment that cost less than $500,000. Materiality allows firms to use an expedient method to handle amounts that are too small to affect user decisions. The plant and equipment meet the definition of an asset, so it is correct that Big Car records them as such. The definition says that assets are probable future economic benefits obtained or controlled by an entity as a result of a past transaction. Big Cars plant and equipment meet all three parts of the definition. ...