Violated Assumption, Principle, or Convention

11 terms by ajmack0421

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Ken Janson, manager of University Bookstore, Inc. bought a radio for his own use. He paid for the set by writing a check on teh Bookstore checking account and charged the "Office Equipment" account.

Entity

Goldman, Inc. recently completed a new 120-story office building which houses their home office and many other tenants. All of the office equipment for the building which has a per item or per unit cost of $900 or less was expense as immaterial even though the office equipment has an average life of 10 years. The total cost of such office equipment is approximately $25 million.

Materiality

A large lawsuit has been filed against Losso Corp. by Rand Co. Losso has recorded a loss and related estimated liability equal to the maximum possible amount it feels it might lose. They are confident, however, that either they will not lose thesuit or they will owe a much smaller amount.

Conservatism

The AICPA, in an audit guide issued for broker and to other dealers in securities, stated that "the trading and investment accounts...should be valued at market or fair value for financial reporting purposes..." The brokerage firm of Heneman and Cummings, Inc. continues to value its trading and investment accounts at cost or market, whichever is lower.

Industry Peculiarities

Savco Discount Centers buys its merchandise by the truck and train carload. Savco does not defer any transportation costs in computing cost in its ending inventory. Such costs, although varying from period to period, are always material in amount.

Matching

Rollet, Inc., a fast-food company, sells franchises for $60,000, accepting a $500 down payment and a 50-year note for the remainder. Rollet promises within 3 years to assist in site selection, building, and management training. Rollet records the $50,000 franchise fee as revenue in the period in which the contract is signed.

Realization

Heber Chemical Company "faces possible expropriation (i.e., takeover) of foreign facilities and possible losses on sums owned by various customers on the verge of bankruptcy." The company president has decided that these possibilities should not be noted onthe financial statements because Heber still hopes that these events will not take place.

Full Disclosure

The treasureer of Montalavi Co. wishes to prepare financial statements only during down-turns in their wine production, which occue periodically when teh rhubarb crop fails. He states that it is at such times that the statements could be most easily prepared. In no event would more than 30 months pass without statements being prepared.

Time Period

Westman Rodak Co. said it plans to adopt complete LIFO inventory accounting...that is expected to reduce 2002 net income about $41 million...Rodak said that the "appropriate portion" of the change will be reflected in the financial statements...Rodak has been using FIFO inventory accounting.

Consistency

The LPS Power & Light Company has purchased a large amoung of PP&E over a number of years. They have decided that because the general price has changed materiality over the years, they will issue only price-level adjusted statements.

Stable Measuring Unit

Wright Manufacturing Co. decuded to manufacture its own widgets bc it would be cheaper to do so than to buy them from an outside supplier. In an attempt to make their statements more comparable with those of their competitors, Wright charged its inventory account for what they felt the widgets would have cost if they had been purchased from an outside supplier. (Two Terms)

Historical Cost, Realization

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