On January 1, 2017, NEW Company Purchased a New Building

question 138

Essay

On January 1, 2017, NEW Company purchased a new building for $9,000,000. Itis 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 endedDecember 31, 2017 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, 2017. How would this omission affect the credibility of thefinancial statements? Name two user groups that would be impacted by the omission?

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Definitions:

Inner Beliefs

Core personal convictions or accepting something as true without immediate empirical evidence, shaping one’s perception and response to the world.

Public Behaviors

Actions or conduct displayed by individuals in social settings or public places, which are influenced by societal norms, culture, and laws.

Autokinetic Effect

A visual illusion where a stationary point of light in a dark environment appears to move due to small involuntary eye movements.

Processes Of Conformity

The psychological mechanisms through which individuals align their attitudes, beliefs, and behaviors with those of a group.