Principles of Accounting
Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Chapter 2, Problem 11SE
To determine

Identify whether they violated the accounting concept for the given business transaction.

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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).5. Davis Bicycle Company received a large order for the sale of 1,000 bicycles at $100 each. The customer paidDavis the entire amount of $100,000 on March 15. However, Davis did not record any revenue until April 17,the date the bicycles were delivered to the customer.
For each of the following situations, identify whether a change in accounting estimate, change in accounting policy, or an accounting error has occurred.  Also indicate whether the change or correction should be made prospectively or retrospectively. The accounting clerk did not record a shipment of product on the last day of the previous fiscal year, because the customer had not yet paid for the product.  The shipment was made FOB shipping point. In the past, Uni-Focus Company used the cash basis of accounting.  This year, the Company is changing to the accrual basis of accounting. Tri-Facet Ltd follows ASPE.  Management of Tri-Facet decided to switch from using the taxes payable method to using the future income tax method.
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.

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Principles of Accounting

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