On January 1, 2022, NEW Company Purchased a New Building

question 56

Essay

On January 1, 2022, NEW Company purchased a new building for $9,000,000. It is estimated that the Building will have a useful life of 12 years and have a salvage value of $1,000,000. At the end of the year, a similar warehouse across the street from NEW's building sold for $10,000,000. NEW's bookkeeper decides not to record any depreciation expense on the new building in the financial statements for the year ended December 31, 2022 because the building has not declined in value. Required - Identify and explain which accounting principle has been violated by not reporting depreciation expense on the new warehouse for the year ended December 31, 2022. How would this omission affect the credibility of the financial statements? Name two user groups that would be impacted by the omission?

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Definitions:

Self-Esteem

An individual's subjective evaluation of their own worth or abilities.

Depression

A mental disorder characterized by persistent sadness and loss of interest in everyday activities.

Gratitude

A feeling of appreciation or thanks towards someone or something.

Intercourse

Sexual activity involving the penetration of the vagina by the penis.