Question

please complete took extra pictures of all 6 answer choices to choose from

Identify the accounting concept that was violated in each of the following situations. 3. Pastel Paint Company purchased land two years ago at a price of $250,000. Because the value of the land has appreciated to $400,000, the company has valued the land at $400,000 in its most recent balance sheet. Atwell Corporation has not prepared financial statements for external users for over three years. 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 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. Golden Book Company purchased a large printing machine for $1,000,000 (a material amount) and recorded the purchase as an expense. 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 5.

Answer 1

1. The historical cost (original transaction value) principle
Land has to be shown at original transaction value in balance sheet

2. The periodicity assumption
Financial statements has to be prepared for external users at regular intervals

3. Revenue Recognition
No revenue is to be recognized on accepting the order, revenue is recognized at delivery of product

4. The economic entity assumption
Personal expense is not to be recorded in business expenses

5. Expense recognition
It has to be recorded as a asset

6. The full disclosure principle
It has to be disclosed as contingent liabilitiy