Listed below are five items that may—or may not—require disclosure in the notes that accompanyfinancial statements.a. Mandella Construction Co. uses the percentage-of-completion method to recognize revenueon long-term construction contracts. This is one of two acceptable methods of accounting forsuch projects. Over the life of the project, both methods produce the same overall results, butthe annual results may differ substantially.b. One of the most popular artists at Spectacular Comics is leaving the company and going towork for a competitor.c. Shortly after the balance sheet date, but before the financial statements are issued, one of Coast Foods’s two processing plants was damaged by a tornado. The plant will be out of ser-vice for at least three months. d. The management of Soft Systems believes that the company has developed systems softwarethat will make Windows ® virtually obsolete. If they are correct, the company’s profits couldincrease by 10-fold or more.e. College Property Management (CPM) withheld a $500 security deposit from students who,in violation of their lease, kept a dog in their apartment. The students have sued CPM for thisamount in small claims court.InstructionsFor each case, explain what, if any, disclosure is required under generally accepted accountingprinciples. Explain your reasoning.
Listed below are five items that may—or may not—require disclosure in the notes that accompany
financial statements.
a. Mandella Construction Co. uses the percentage-of-completion method to recognize revenue
on long-term construction contracts. This is one of two acceptable methods of accounting for
such projects. Over the life of the project, both methods produce the same overall results, but
the annual results may differ substantially.
b. One of the most popular artists at Spectacular Comics is leaving the company and going to
work for a competitor.
c. Shortly after the balance sheet date, but before the financial statements are issued, one of
Coast Foods’s two processing plants was damaged by a tornado. The plant will be out of ser-
vice for at least three months.
d. The management of Soft Systems believes that the company has developed systems software
that will make Windows ® virtually obsolete. If they are correct, the company’s profits could
increase by 10-fold or more.
e. College Property Management (CPM) withheld a $500 security deposit from students who,
in violation of their lease, kept a dog in their apartment. The students have sued CPM for this
amount in small claims court.
Instructions
For each case, explain what, if any, disclosure is required under generally accepted accounting
principles. Explain your reasoning.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
