Dr. David Bernard is a well-known dermatology and cosmetology companies’ owner reputed to earn $30 million a year. Dr. Bernard owns several companies that take care of various aspects of dermatology care and cosmetology and related endeavors. Consider Dr. David Bernard Dermatology Clinic and Dr. David Bernard Cosmetology Products, two of those organizations. Required: Identify the accounting concept or principle that would guide the accounting for each of the following business transactions or events. Bernard suspects that the dermatology clinic is profitable and that the cosmetology products company is losing money. He knows that overall his business endeavors are profitable, but he wishes to know the profit or loss of each separate organization. It turns out that Dr. David Bernard Cosmetology Products is losing money and Dr. Bernard wishes to shut down the business, sell its assets, and pay off the liabilities. He hopes to have a little cash left over. David Bernard Dermatology Clinic purchases an office building for its administrative quarters. The real estate appraisal on the building is $600,000, but Dr. David Bernard Dermatology Clinic is able to buy the building for $550,000. What amount should Dr. David Bernard Dermatology Clinic record for the building? Bernard the man wishes to keep his personal affairs separate from the finances of his businesses. David Bernard Dermatology Clinic reports a balance sheet to show the business’s financial position each year. The assets and liabilities have current values that differ significantly from the reported amounts. As a result, the owners’ equity of the business is underestimated on the balance sheet. What accounting principle keeps Dr. David Bernard Dermatology Clinic from changing the reported amount of its owners’ equity?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Dr. David Bernard is a well-known dermatology and cosmetology companies’ owner reputed to earn $30 million a year. Dr. Bernard owns several companies that take care of various aspects of dermatology care and cosmetology and related endeavors. Consider Dr. David Bernard Dermatology Clinic and Dr. David Bernard Cosmetology Products, two of those organizations. Required: Identify the accounting concept or principle that would guide the accounting for each of the following business transactions or events. Bernard suspects that the dermatology clinic is profitable and that the cosmetology products company is losing money. He knows that overall his business endeavors are profitable, but he wishes to know the profit or loss of each separate organization. It turns out that Dr. David Bernard Cosmetology Products is losing money and Dr. Bernard wishes to shut down the business, sell its assets, and pay off the liabilities. He hopes to have a little cash left over. David Bernard Dermatology Clinic purchases an office building for its administrative quarters. The real estate appraisal on the building is $600,000, but Dr. David Bernard Dermatology Clinic is able to buy the building for $550,000. What amount should Dr. David Bernard Dermatology Clinic record for the building? Bernard the man wishes to keep his personal affairs separate from the finances of his businesses. David Bernard Dermatology Clinic reports a balance sheet to show the business’s financial position each year. The assets and liabilities have current values that differ significantly from the reported amounts. As a result, the owners’ equity of the business is underestimated on the balance sheet. What accounting principle keeps Dr. David Bernard Dermatology Clinic from changing the reported amount of its owners’ equity?

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