Reference no: EM132765908

Problem 1: The continuity assumption is the basis for the rule that:

a) The income statement should not include material gains and losses that are both unusual and infrequent.
b) Treasury stock should not be reported in the balance sheet as an asset
c) The cost of installing a machine should not be included in the recorded cost of the machine, but rather expensed immediately
d) The cost of operating assets should be allocated to expense systematically over their useful lives

Problem 2: For which of the following should a provision be recognized?

a) Future operating losses
b) Obligations under insurance contracts
c) Reductions in fair value of financial instruments
d) Obligations for plant decommissioning costs