Identify the accounting concept that was violated in each of the following situations. 1. Pastel Paint Company purchased land two years ago for a price of $250,000. Because the value of the land has appreciated to $400,000, the Expense recognition; materiality company has valued the land at $400,000 in its most recent balance sheet. 2. Atwell Corporation has not prepared financial statements for external users for over three years. 3. The Klingon Company sells farm machinery. Revenue from a large order of machinery from a new buyer was recorded the day the order was received. 4. Don Smith is the sole owner of a company called Hardware City. The company recently paid a $150 utility bill for Smith's personal residence and recorded a $150 expense. 5. Golden Book Company purchased a large printing machine for $1,000,000 (a material amount) and recorded the purchase as an expense. 6. Ace Appliance Company is involved in a major lawsuit involving injuries sustained by some of its employees in the manufacturing plant. The company is being sued for $2,000,000, a material amount, and is not insured. The suit was not disclosed in the most recent financial statements because no settlement had been reached. Expense recognition; materiality
Identify the accounting concept that was violated in each of the following situations. 1. Pastel Paint Company purchased land two years ago for a price of $250,000. Because the value of the land has appreciated to $400,000, the Expense recognition; materiality company has valued the land at $400,000 in its most recent balance sheet. 2. Atwell Corporation has not prepared financial statements for external users for over three years. 3. The Klingon Company sells farm machinery. Revenue from a large order of machinery from a new buyer was recorded the day the order was received. 4. Don Smith is the sole owner of a company called Hardware City. The company recently paid a $150 utility bill for Smith's personal residence and recorded a $150 expense. 5. Golden Book Company purchased a large printing machine for $1,000,000 (a material amount) and recorded the purchase as an expense. 6. Ace Appliance Company is involved in a major lawsuit involving injuries sustained by some of its employees in the manufacturing plant. The company is being sued for $2,000,000, a material amount, and is not insured. The suit was not disclosed in the most recent financial statements because no settlement had been reached. Expense recognition; materiality
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter3: The Basics Of Record Keeping And Financial Statement Preparation: Income Statement
Section: Chapter Questions
Problem 19E
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Transcribed Image Text:Identify the accounting concept that was violated in each of the following situations.
1. Pastel Paint Company purchased land two years ago for a price of
$250,000. Because the value of the land has appreciated to $400,000, the Expense recognition; materiality
company has valued the land at $400,000 in its most recent balance sheet.
2. Atwell Corporation has not prepared financial statements for external
users for over three years.
3. The Klingon Company sells farm machinery. Revenue from a large order
of machinery from a new buyer was recorded the day the order was
received.
4. Don Smith is the sole owner of a company called Hardware City. The
company recently paid a $150 utility bill for Smith's personal residence and
recorded a $150 expense.
5. Golden Book Company purchased a large printing machine for
$1,000,000 (a material amount) and recorded the purchase as an expense.
6. Ace Appliance Company is involved in a major lawsuit involving injuries
sustained by some of its employees in the manufacturing plant. The
company is being sued for $2,000,000, a material amount, and is not
insured. The suit was not disclosed in the most recent financial statements
because no settlement had been reached.
Expense recognition; materiality
▶
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