Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN: 9781285595047
Author: Weil
Publisher: Cengage
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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.
d. Moss Corporation closes the books each month and prepares monthly financial statements.
Violation: (Yes/No)
Applicable Assumption/Principle:
e. Carroll Corporation, a US company, purchased a machine from Germany for 10,000 Euros and recorded the machine on their books at $12,000 US
Violation: (Yes/No)
Applicable…
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.
d. Moss Corporation closes the books each month and prepares monthly financial statements.
Violation: (Yes/No)
Applicable Assumption/Principle:
e. Carroll Corporation, a US company, purchased a machine from Germany for 10,000 Euros and recorded the machine on their books at $12,000 US
Violation: (Yes/No)…
Joseph Berio is a loan officer with the First Bank of Tennessee. Red Brick, Inc., a major producer of masonry products, has applied for a short-term loan. Red Brick supplies building material throughout the southern states, with brick plants located in Tennessee, Alabama, Georgia, and Indiana.The firm’s income statement and balance sheet are given below. The third table presents both a ratio analysis of Red Brick’s previous year’s financial statements and the industry averages of the ratios.
Red Brick Income Statement
(for the period ending December 12/31/20X1)
Sales
$
151,000,000
Cost of goods sold
134,000,000
Administrative expenses
25,000,000
Operating income
$
-8,000,000
Interest expense
13,000,000
Taxes
400,000
Net income
$
-21,400,000
Red Brick Balance Sheet as of 12/31/20X2
Assets
Liabilities and Stockholders’ Equity
Cash
$
600,000
Accounts payable
$
33,000,000
Accounts receivable
39,000,000
*
Notes payable
8,000,000…
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The KEY to Understanding Financial Statements; Author: Accounting Stuff;https://www.youtube.com/watch?v=_F6a0ddbjtI;License: Standard Youtube License