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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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. |
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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