Chapter 3, Problem 22E

Listed below are the current Accounting Assumptions and Principles                                   Economic Entity Assumption   Monetary Unit Assumption   Historical Cost Principle             Going Concern Assumption   Revenue Recognition Principle   Full Disclosure Principle             Time Period Assumption   Matching Principle                                       Required:                     For the following situations, identify whether the situation represents a violation or a correct application of GAAP, and which assumption/principle is applicable.                     h. Nixon Corp records and maintains their books at cost and/or current value, not at a liquidated value.             Violation: (Yes/No)       Applicable Assumption/Principle:                 i. Wages of $4,000 related to the last two days of July, were recorded as expense in July even though they were paid in August.             Violation: (Yes/No)       Applicable…

Presented below are the assumptions, principles, and constraint used in this chapter. 1.    Economic entity assumption 2.    Going concern assumption 3.    Monetary unit assumption 4.    Periodicity assumption 5.    Measurement principle (historical cost) 6.    Measurement principle (fair value) 7.    Expense recognition principle 8.    Full disclosure principle 9.    Cost constraint 10.    Revenue recognition principle Instructions Identify by number the accounting assumption, principle, or constraint that describes each situation below. Do not use a number more than once. a.    Allocates expenses to revenues in the proper period. b.    Indicates that fair value changes subsequent to purchase are not recorded in the accounts. (Do not use revenue recognition principle.) c.    Ensures that all relevant financial information is reported. d.    Rationale why plant assets are not reported at liquidation value. (Do not use historical cost principle.) e.    Indicates that personal and…

Lugi Ka Na Company has been forced into bankruptcy as of April 30 because of its inability to pay its debts. The statement of financial position on that date shows: ASSETS LIABILITIES & EQUITY Cash Accounts Receivable Note Receivable Inventory Prepaid Expenses Land and Building Equipment, net P5,400 78,700 37,000 175,700 1,900 122,500 97,600 Accounts Payable Notes Payable – PNB Notes Payable - suppliers Accruedwages Accruedtaxes P105,000 30,000 102,500 3,700 9,300 180,000 150,000 (61,700) P518,800 Mortgage Bonds Payable Common stock-P100 par Retained Earnings Total Liabilities & Equity Total Assets P518,800 Additional information: a. Accounts receivable of P32,220 and notes receivable of P25,000 are expected to be collectible. The good notes are pledged to PhilippineNational Bank. b. Inventories are expectedto bring in P90,200when soldunder bankruptcyconditions. Landand buildingshave an appraised value of P190,000. They serveas security on the bonds. d. The currentvalue of the…