For each of the following situations, (1) indicate whether you agree or disagree with the financial reporting practice employed and (2) state the accounting concept that is applied (if you agree) or violated (if you disagree), WITH EXPLANATION.
A. For each of the following situations, (1) indicate whether you agree or disagree with the financial reporting practice employed and (2) state the accounting concept that is applied (if you agree) or violated (if you disagree), WITH EXPLANATION.
i. Ahmed Corporation did not disclose that it was the defendant in a material lawsuit because the trial was still in progress.
ii. Waleed Corporation files quarterly and annual financial statements with the MSM.
iii. Muscat Pharmaceutical paid rent on its office building for the next two years and charged the entire expenditure to rent expense.
iv. Gulf Engineering records revenue only after products have been shipped, even though customers pay the Company 50% of the sales price in advance.
v. Oman Oil Company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. No mention of the change was included in the financial statements. The change had a material effect on Oman Oil financial statements.
vi. Which component would allow a company to record the purchase of a R.O.120 printer as an expense rather than capitalizing the printer as an asset?
vii. Donald Kirk, former chairman of the FASB, once noted that “…there must be public confidence that the standard-setting system is credible, that selection of board members is based on merit and not the influence of special interest…” Which characteristic is implicit in Mr. Kirk’s statement?
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