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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. |
| g. Buckner Corp is being sued for $1,000,000. There is a probable chance they will lose. The company disclosed this fact in their notes to their financials. | ||||||||||
| Violation: (Yes/No) | ||||||||||
| Applicable Assumption/Principle: | ||||||||||
| 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 Assumption/Principle: | ||||||||||
| j. Revenues are recorded when they are earned and realizable, regardless of when cash it received. | ||||||||||
| Violation: (Yes/No) | ||||||||||
| Applicable Assumption/Principle: |
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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. 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…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. a. In May 2021, Regent Corporation recorded as revenue $5,000 received in advance from a customer for a job that would be completed in June 2021. Violation: (Yes/No) Applicable Assumption/Principle: b. Sally Maze made sure to keep her personal expenditures separate from her marketing company books.…Current Attempt in Progress Which one of these statements about the accrual-basis of accounting is false? O This basis is in accord with generally accepted accounting principles. Companies record events that change a company's financial statements in the periods in which the events occur. Companies record revenue only when they receive cash, and record expense only when they pay out cash. O Companies recognize revenue in the period in which the performance obligation is satisfied. Save for Later Attempts: 0 of 1 used Subm
- Which of the following would result in the RETURN OF ASSETS for an accounting entity deteriorating. Answer Can be all of them, none of them or any combination of them. 1. Accrued interest revenue is adjusted 2. Share market price of the entity's shares increases 3. Cash receipt from a customer for amounts owing which was previously sold on creditPlease answer the following question(s): Sometimes a business entity will change its method of accounting for certain items. The change may be classified as a change in accounting principle, a change in accounting estimate, or a change in reporting entity. Listed below are three independent, unrelated sets of facts relating to accounting changes. Situation I: A company determined that the depreciable lives of its fixed assets are presently too long to fairly match the cost of the fixed assets with the revenue produced. The company decided at the beginning of the current year to reduce the depreciable lives of all of its existing fixed assets by five years. Situation II: On December 31, 2020, Gary Company owned 51% of Allen Company, at which time Gary reported its investment on a nonconsolidated basis due to political uncertainties in the country in which Allen was located. On January 2, 2021, the management of Gary Company was satisfied that the political uncertainties were resolved…Which of the following is a valid assumption from an accounting perspective? O A company that has declared bankruptcy is referred to as a going concern. O Financial statements should be prepared on a calendar-year basis. O Financial statements are prepared for a specific entity that is distinct from the entity's owners. O The results of customer satisfaction surveys should be reported in the financial statements because such results could impact decisions of financial statement users.
- 2. A stockholder has filed a lawsuit against Fischer Corporation. Fischer's attorneys have reviewed the facts of the case. Their review revealed that similar lawsuits have never resulted in a cash award and it is highly unlikely that this lawsuit will either. Please indicate the treatment of this situation. A) Record an accounts receivable on the balance sheet. B) Record an accounts payable on the balance sheet. c) Record a contingent liability on the balance sheet and disclose the liability in a financial statement footnote D) Neither record nor disclose any liability. Your answer is Explain your answer:State the accounting principle or assumption that is most applicable in the following situations: 1. A company prepares consolidated financial statements for a subsidiary that it owns. 2. The decision to remove an asset from the balance sheet 3. A large sale on account is not recognized as revenue because collectability is an issue. 4. Disclosure of the liability from a lawsuit in the financial statements 5. Preparation of monthly financial statements 6. Using the Canadian dollar in financial statements 7. An energy company includes detailed information about its reserves in its notes to the financial statements.The revenue recognition principle and the expense recognition principle require that the company recognize related revenue and expense transactions in the same accounting period. Discuss why this matching concept is important and explain how the financial information would be misleading if the accountant did not follow these rules. Provide examples in your discussion to demonstrate your point(s).
- 1. A Corporation's accounting statement of affairs shows a recovery percentage of 120%. The rate of recovery means that a. Secured creditors will receive an amount in excess of the book value of their claims b. Unsecured creditors will receive an amount in excess of the book value of their claims c. Stockholders may expect some returns on their interests d.An error was made in the preparation of the statement 2. Which of the following items is an example of general unsecured creditors? a. Salaries payable b. Legal and accounting fees incurred in the preparation of financial statement c. Trust fees d.Notes payable secured by a notes receivable 3. The transaction price a. Excludes discounts , volume rebates, coupons and free products or services b. Is the amount of consideration that a company expects to pay to a customer c. Includes time value of money if the contract is for less than a year d. Includes consideration received such as donations, gifts,…Which of the following statements relating to the accounting treatment of the identified item is CORRECT? O 1. Dividends become a legal liability of the company when they are declared and as such, they are recorded in the current liabilities section of the Balance Sheet and as an expense on the Income Statement O 2.A contingent liability should only be disclosed in the Notes to the Financial Statements because it meets the accounting definition of a liability O 3. Inventories are valued at the lower of cost and net realisable value on the Balance Sheet while in contrast, cash is valued at fair value O 4. The revenue realisation principle states that revenue can only be recognised when there has been an arms-length transaction1. According to the accrual accounting model, recognition of loss leads to decrease in a company’s net assets that did not arise due to a transaction with an owner of the business. Select one: True False 2. If the transferor of receivables surrenders control over them, the transaction involving receivables is treated as a sale, and any gain or loss is recognized in earnings. Select one: True False 3. Which of the following statements about the accrual accounting is NOT true? Accrual earnings help measure a company’s performance better. Accrual accounting income for a given period always provides a precise picture of a company’s economic performance in this period. Accrual accounting better matches revenue with economic effort to receive it. It is normal that accrual accounting revenue for a period does not correspond to cash receipts for the same period. 4. Which of the following statements about Loss Contingencies is TRUE? According…