Consider the following information
$$\begin{array} { | l | r | r | }
\hline & \text { Mosman Ltd } & \text { Manly Ltd } \
\hline \text { Sales } & \$ 5000000 & \$ 50000 \
\hline \text { Cost and expenses } & 4000000 & 40000 \
\hline \text { Net profit } & 1000000 & 10000 \
\hline & & \
\hline \text { Impairment loss } & 40000 & 5000 \
\hline
\end{array}$$
You are an accountant for both firms and would like to determine whether the impairment loss is material or not.Which of the following statement(s)is/are correct?
A) The impairment loss for both firms is material.
B) The impairment loss for Manly Ltd is material.
C) The impairment loss for Mosman Ltd is material.
D) The impairment loss for both firms is immaterial.

Question

Consider the following information 
$$\begin{array} { | l | r | r | } 
\hline & \text { Mosman Ltd } & \text { Manly Ltd } \
\hline \text { Sales } & \$ 5000000 & \$ 50000 \
\hline \text { Cost and expenses } & 4000000 & 40000 \
\hline \text { Net profit } & 1000000 & 10000 \
\hline & & \
\hline \text { Impairment loss } & 40000 & 5000 \
\hline
\end{array}$$
You are an accountant for both firms and would like to determine whether the impairment loss is material or not.Which of the following statement(s)is/are correct?
A) The impairment loss for both firms is material.
B) The impairment loss for Manly Ltd is material.
C) The impairment loss for Mosman Ltd is material.
D) The impairment loss for both firms is immaterial.

Quizplus · Accepted Answer

The impairment loss for Manly Ltd is material because it represents 10% of its net profit, which is significant. For Mosman Ltd, the impairment loss is only 4% of its net profit, which is generally considered immaterial.

Consider the Following Information You Are an Accountant for Both Firms and Would Like