Question

Which of the following are examples of judgments made in the accounting reporting process? I. Useful...

  1. Which of the following are examples of judgments made in the accounting reporting process?
    I. Useful life of machinery
    II. Allowance for doubtful accounts
    III. Obsolescence of assets
    IV. Interest payment on bonds

Group of answer choices

A) I, II, III and IV

B) I, II and III

C) II and III

D) I and III

Business   Accounting   
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Answer #1

Answer: B) I, II and III

Useful life of Machinery, Allowances for doubtful accounts and Obsolescence of assets are determined based on management judgements of expected life of asset, portion of accounts receivable expected to be uncollectible and decline in asset value due to factors like technology change etc.

Interest payment on bonds is determined by multiplying the par value of the bond by the the coupon rate. since the coupon rate will be specifed in the bond Indenture (deed between bond issuer & lender), Interest payment on bonds is not determined based on Judgement.

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