For the following situations, identify whether the situation represents a violation or a correct application of GAAP, and which assumption/principle is applicable.
For the following situations, identify whether the situation represents a violation or a correct application of GAAP, and which assumption/principle is applicable.
Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter14: Activities Required In Completing A Quality Audit
Section: Chapter Questions
Problem 65RSCQ
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Question
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. | |||||||||
Violation: (Yes/No) | |||||||||
Applicable Assumption/Principle: | |||||||||
c. Gross Corporation purchased land for $100,000 on April 10, 2015. On March 5, 2021, Gross decided to increase the land to its fair value of $175,000. | |||||||||
Violation: (Yes/No) | |||||||||
Applicable Assumption/Principle: |
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