The following situations involve accounting principles and assumptions. 1. Grossman Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports. 2. Jones Company includes in its accounting records only transaction data that can be expressed in terms of money.
Chapter 1, Exercises #4
The following situations involve accounting principles and assumptions.
1. Grossman Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports.
2. Jones Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Caleb Borke, owner of Caleb’s Cantina, records his personal living costs as expenses of the Cantina.
Instructions
For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.
1. Grossman Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports.
2. Jones Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Caleb Borke, owner of Caleb’s Cantina, records his personal living costs as expenses of the Cantina.
Instructions
For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.
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Answer
1. Incorrect. The cost principle requires that assets be recorded and reported at their …View the full answer
Related Book For 
Accounting Principles
9th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
ISBN: 978-0470533475