For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the accounting concept that is applied (if you agree) or violated (if you disagree). Wagner Corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar. Spooner Oil Company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. No mention of the change was included in the financial statements. The change had a material effect on Spooner's financial statements. Cypress Manufacturing Company purchased machinery having a five-year life. The cost of the machinery is being expensed over the life of the machinery. Rudeen Corporation purchased equipment for $180,000 at a liquidation sale of a competitor. Because the equipment was worth $230,000, Rudeen valued the equipment in its subsequent balance sheet at $230,000. Davis Bicycle Company received a large order for the sale of 1,000 bicycles at $100 each. The customer paid Davis the entire amount of $100,000 on March 15. However, Davis did not record any revenue until April 17, the date the bicycles were delivered to the customer. Gigantic Corporation purchased two small calculators at a cost of $32.00. The cost of the calculators was expensed even though they had a three-year estimated useful life. Esquire Company provides financial statements to external users every three years

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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For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the accounting concept that is applied (if you agree) or violated (if you disagree).

Wagner Corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar.
Spooner Oil Company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. No mention of the change was included in the financial statements. The change had a material effect on Spooner's financial statements.
Cypress Manufacturing Company purchased machinery having a five-year life. The cost of the machinery is being expensed over the life of the machinery.
Rudeen Corporation purchased equipment for $180,000 at a liquidation sale of a competitor. Because the equipment was worth $230,000, Rudeen valued the equipment in its subsequent balance sheet at $230,000.
Davis Bicycle Company received a large order for the sale of 1,000 bicycles at $100 each. The customer paid Davis the entire amount of $100,000 on March 15. However, Davis did not record any revenue until April 17, the date the bicycles were delivered to the customer.
Gigantic Corporation purchased two small calculators at a cost of $32.00. The cost of the calculators was expensed even though they had a three-year estimated useful life.
Esquire Company provides financial statements to external users every three years.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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