Presented Below Are Five Inappropriate Accounting Procedures That Are Being $\$ 5,000,000$

question 4

Essay

Presented below are five inappropriate accounting procedures that are being used by the Devin Corporation.
a. On the yerr-end balance sheet, DevinCorporation reported its inventory at market value, which was greater than cost. As a result of this proce chue, a gain was recogrized on the company's income statement.

b. Mrs. Devin, the president of the company, purchased an aut omobile for her son using the company's money. The company's accountant recorded the expenditure as salaries expense.

Devin Carporation reported income from operations of $\$ 5,000,000$ for the current year. During the year, Devin settled and paid a $\$ 5,000,000$ class action lawsut against the company resulting from damages incurred from the sale of defective products. The settlementwas reported as a miscellane ous expense with no footnotes provided.

d. Devin Corporation is going to issue additional common stock next year. In order to improve its income, the company switched from the LIFO inventory cost flow method to FIFO. The company did not disclose the accounting change. Comparative finencial statements were prepared.

e.The company made $\$ 3,000,000$ of expenditures to expand a building that originally cost $\$ 5,000,000$ . The expenditures are expected to benefit operations over the building s remaining useful life of ten years. The expencitureswere expensed as maintenance. Required:
For each of the above items, list the accounting assumption(s), convention(s), or principle(s)that is (are)being violated.

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Definitions:

Prejudice

A preconceived opinion or judgment about an individual or group without sufficient knowledge, factual basis, or experience, often leading to discrimination.

Stereotypes

Oversimplified generalizations about a group of people that often lead to prejudiced attitudes and discrimination.

Secondary Labour Market

Part of the job market consisting of low-paying jobs with poor working conditions, limited job security, and few prospects for advancement.

Fringe Benefits

Additional benefits supplementing an employee's salary, such as health insurance, paid vacations, and retirement plans, which are not part of the direct wages.