Listed below are five items that may—or may not—require disclosure in the notes that accompany financial statements. a. Mandella Construction Co. uses the percentage-of-completion method to recognize revenue on long-term construction contracts. This is one of two acceptable methods of accounting for such projects. Over the life of the project, both methods produce the same overall results, but the annual results may differ substantially. b. One of the most popular artists at Spectacular Comics is leaving the company and going to work for a competitor. c. Shortly after the balance sheet date, but before the financial statements are issued, one of Coast Foods’s two processing plants was damaged by a tornado. The plant will be out of service for at least three months. d. The management of Soft Systems believes that the company has developed systems software that will make Windows ® virtually obsolete. If they are correct, the company’s profits could increase by 10-fold or more. e. College Property Management (CPM) withheld a $500 security deposit from students who, in violation of their lease, kept a dog in their apartment. The students have sued CPM for this amount in small claims court. Instructions For each case, explain what, if any, disclosure is required under generally accepted accounting principles. Explain your reasoning.

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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Listed below are five items that may—or may not—require disclosure in the notes that accompany
financial statements.
a. Mandella Construction Co. uses the percentage-of-completion method to recognize revenue
on long-term construction contracts. This is one of two acceptable methods of accounting for
such projects. Over the life of the project, both methods produce the same overall results, but
the annual results may differ substantially.
b. One of the most popular artists at Spectacular Comics is leaving the company and going to
work for a competitor.
c. Shortly after the balance sheet date, but before the financial statements are issued, one of
Coast Foods’s two processing plants was damaged by a tornado. The plant will be out of service
for at least three months.
d. The management of Soft Systems believes that the company has developed systems software
that will make Windows ® virtually obsolete. If they are correct, the company’s profits could
increase by 10-fold or more.
e. College Property Management (CPM) withheld a $500 security deposit from students who,
in violation of their lease, kept a dog in their apartment. The students have sued CPM for this
amount in small claims court.
Instructions
For each case, explain what, if any, disclosure is required under generally accepted accounting
principles. Explain your reasoning.

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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