Exercise $1-11($Static$)$ Basic assumptions and principles $[$LO$1-8,1-9]$

Identify the accounting concept that was violated in each of the following situations.

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 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.

Expense recognition; materiality

Revenue recognition

The economic entity assumption

The full disclosure principle

The historical cost $($original transaction value$)$ principle

The periodicity assumption