Assume the following independent events occurred during 2022. Identify the most relevant accounting principle/concept has been violated by the Company. Indicate the effect on profit for the year ended 31 December 2022 as a result of this violation. Use the following symbols: O = overstated, U = understated and NE = no effect. Fill in your answers in the table provided. (1) The owner of the Company purchased a boxing punching bag for his son’s use. The Company reported it as the Company’s Equipment and made the monthly depreciation. (2) The Company purchased an electric pencil sharpener for office use. The Company estimated the useful life of the pencil sharpener to be 4 years and so it recorded it under Equipment and made the monthly depreciation. (3) A customer was injured in a training class. He sued the Company for a big compensation amount, which cannot be estimated. The court hearing date is fixed on 1 March 2023. The Company ignored it when preparing the Financial Statement. (4) The Company recorded the total amount of the 1-year rent received in advance as rent revenue. The rent agreement was effective in March 2022.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Assume the following independent events occurred during 2022. Identify the most relevant accounting principle/concept has been violated by the Company. Indicate the effect on profit for the year ended 31 December 2022 as a result of this violation. Use the following symbols: O = overstated, U = understated and NE = no effect. Fill in your answers in the table provided. (1) The owner of the Company purchased a boxing punching bag for his son’s use. The Company reported it as the Company’s Equipment and made the monthly depreciation. (2) The Company purchased an electric pencil sharpener for office use. The Company estimated the useful life of the pencil sharpener to be 4 years and so it recorded it under Equipment and made the monthly depreciation. (3) A customer was injured in a training class. He sued the Company for a big compensation amount, which cannot be estimated. The court hearing date is fixed on 1 March 2023. The Company ignored it when preparing the Financial Statement. (4) The Company recorded the total amount of the 1-year rent received in advance as rent revenue. The rent agreement was effective in March 2022.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Tax loss carryovers
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education