Exercise 1-13 Basic assumptions and principles [LO1-7, 1-8, 1-9]
For
each of the following situations, state whether you agree or disagree
with the financial reporting practice employed, and briefly explain the
reason for your answer.
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| 1. |
The
controller of the Dumars Corporation increased the carrying value of
land from its original cost of $2 million to its recently appraised
value of $3.5 million.
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| 2. |
The
president of Vosburgh Industries asked the company controller to charge
miscellaneous expense for the purchase of an automobile to be used
solely for personal use.
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| 3. |
At
the end of its 2013 fiscal year, Dower, Inc., received an order from a
customer for $45,350. The merchandise will ship early in 2014. Because
the sale was made to a long-time customer, the controller recorded the
sale in 2013.
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| 4. |
At
the beginning of its 2013 fiscal year, Rossi Imports paid $48,000 for a
two-year lease on warehouse space. Rossi recorded the expenditure as an
asset to be expensed equally over the two-year period of the lease.
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| 5. |
The Reliable Tire Company included a note in its financial statements that described a pending lawsuit against the company.
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| 6. |
The
Hughes Corporation, a company whose securities are publicly traded,
prepares monthly, quarterly, and annual financial statements for
internal use but disseminates to external users only the annual
financial statements.
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