For each of the following situations, indicate whether you agree or disagree with the financial reporting practiceemployed and state the accounting concept that is applied (if you agree) or violated (if you disagree).6. Gigantic Corporation purchased two small calculators at a cost of $32.00. The cost of the calculators wasexpensed even though they had a three-year estimated useful life.

For each of the following situations, indicate whether you agree or disagree with the financial reporting practiceemployed and state the accounting concept that is applied (if you agree) or violated (if you disagree).6. Gigantic Corporation purchased two small calculators at a cost of $32.00. The cost of the calculators wasexpensed even though they had a three-year estimated useful life.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 1PB: Consider the following situations and determine (1) which type of liability should be recognized...

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Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years. B. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60. C. An employee earns $1,000 in pay and the employer withholds $46 for federal income tax. D. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.
Identify the accounting concept that was violated in each of the following situations.1. Astro Turf Company recognizes an expense, cost of goods sold, in the period the product is manufactured.2. McCloud Drug Company owns a patent that it purchased three years ago for $2 million. The controller recently revalued the patent to its approximate market value of $8 million.3. Philips Company pays the monthly mortgage on the home of its president Larry Crosswhite and charges the expenditure to miscellaneous expense.
For each of the following situations, indicate whether you agree or disagree with the financial reporting practiceemployed and state the accounting concept that is applied (if you agree) or violated (if you disagree).3. Cypress Manufacturing Company purchased machinery having a five-year life. The cost of the machinery isbeing expensed over the life of the machinery
HAT Ltd owns a number of its retail premises, which it revalues annually. This year several of its shops rose sharply in value due to inflated property prices in their locality. HAT does not revalue its factory premises, which are held in the statement of financial position at $2.7m. HAT ltd's Profit before tax was $7m and a statement of financial position total of $23m. Briefly give your views on this situations and state what type of auditor’s report should be issued and explain your choice. You should not reproduce the entire audit report. Only mention appropriate extracts which are relevant.
For each of the following situations, state whether you agree or disagree with the financial reporting practiceemployed, and briefly explain the reason for your answer.1. The controller of the Dumars Corporation increased the carrying value of land from its original cost of$2 million to its recently appraised value of $3.5 million.2. The president of Vosburgh Industries asked the company controller to charge miscellaneous expense for thepurchase of an automobile to be used solely for personal use.3. At the end of its 2018 fiscal year, Dower, Inc., received an order from a customer for $45,350. The merchandise will ship early in 2019. Because the sale was made to a long-time customer, the controller recorded thesale in 2018.4. At the beginning of its 2018 fiscal year, Rossi Imports paid $48,000 for a two-year lease on warehouse space.Rossi recorded the expenditure as an asset to be expensed equally over the two-year period of the lease.
. Discuss the appropriate treatment in the financial statements of each of the following. a. Gain on sale of investment securities. b. A profit-sharing bonus to employees computed as a percentage of net income. c. Additional depreciation on factory machinery because of an error in computing depreciation for the previous year. d. Rent received from subletting a portion of the office space. e. A patent infringement suit, brought 2 years ago against the company by another company, was settled this year by a cash payment of $725,000. f. A reduction in the Allowance for Doubtful Accounts balance because the account appears to be considerably in excess of the probable loss from uncollectible receivables.
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).1. Winderl Corporation did not disclose that it was the defendant in a material lawsuit because the trial was still in progress.2. Alliant Semiconductor Corporation files quarterly and annual financial statements with the SEC.3. Reliant Pharmaceutical paid rent on its office building for the next two years and charged the entire expenditure to rent expense.4. Rockville Engineering records revenue only after products have been shipped, even though customers pay Rockville 50% of the sales price in advance.
Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A business depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60. An employee earns $1,000 in pay and the employer withholds $46 for federal income tax. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.
4. Amsyari Enterprise bought the secondhand motor vehicles for RM40,000. He incurred a major overhaul cost of RM10,000. The car was repainted for RM2,000. He also spent RM800 on road tax and insurance. He recorded RM40,000 as the cost of the motor vehicles whereas the other expenditure was treated as expenses.How the effect of the accounting error on Amsyari Enterprise’s statement of profit and loss and statement of financial position?
HAT Ltd owns a number of its retail premises, which it revalues annually. This year several of its shops rose sharply in value due to inflated property prices in their locality. HAT does not revalue its factory premises, which are held in the statement of financial position at $2.7m. HAT ltd's Profit before tax was $7m and a statement of financial position total of $23m. State what type of auditor’s report should be issued and explain your choice. You should not reproduce the entire audit report. Only mention appropriate extracts which are relevant.
Amsyari Enterprise bought the secondhand motor vehicles for RM40,000. Heincurred a major overhaul cost of RM10,000. The car was repainted for RM2,000.He also spent RM800 on road tax and insurance. He recorded RM40,000 as the cost of the motor vehicles whereas the other expenditure was treated as expenses.How the effect of the accounting error on Amsyari Enterprise’s statement of profit and loss and statement of financial position?
Tate Corporation purchased a building for its grocery store for $30,000 in 1970. Based on inflation estimates, the amount of this asset has been adjusted in the accounting records. The building is now reported at $75,000. Which of the following concepts or principles of accounting is being violated and why?