The Following Are Independent Situations Observed by Dino Industrial's Senior

question 100

Essay

The following are independent situations observed by Dino Industrial's senior accountant at December 31, 2021, the company's year end:
1. Dino has parts inventory for use in its construction department (not for resale). The inventory includes over 1,500 different items, with between 10 and 100 of each item in stock. The cost of the individual items ranges from $ 0.30 to $ 1.50. In the past, the inventory quantities have been estimated by weighing the parts bins. This year, the accountant had the individual items counted and priced to provide more precise information. The total estimated value of the items is $ 45,000, which is material in total. It took four staff a full day to count the inventory at a cost of $ 1,000 in labour costs, and it would have taken two staff a half day to complete the estimate by weighing at a cost of $ 250. After the count, an entry of $ 27 was needed to reduce the inventory balance to actual. The entry was debited to Construction Supplies Expense.
2. Goods with a sales price of $ 55,000 were shipped to a customer FOB shipping point. The goods were picked up by the shipping company on December 31, 2021, and delivered to the customer on January 2, 2022. The customer's invoice was prepared and recorded in January 2022.
3. Prepaid expenses include $ 12,000 in prepaid rent related to the long-term lease of a branch office. When the lease was signed 4 years ago, Dino had to pay a $ 6,000 deposit, which comprises the final month's rent. Rental rates have since doubled in that location, so an entry has been recorded to reflect this value as follows: "Debit Prepaid Rent $ 6,000; Credit Rent Expense $ 6,000." The junior accountant's argument for making this entry is that the company has benefited from the long-term lease and the financial statements should reflect this benefit.
4. One of the owners of Dino purchased a vacation property for $ 190,000 with company funds. The transaction was recorded as a debit to Property, Plant, and Equipment, and a credit to Cash.
Instructions
For each of the events, indicate the accounting assumption, concept, constraint, or recognition criteria that have been violated and provide your reason. Prepare the correcting entry required, or if no entry is required, explain what other change, if any, should be made to ensure that Dino's financial statements comply with GAAP.

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Definitions:

Periodically Recorded

Financial transactions or events that are recorded at regular intervals, such as monthly, quarterly, or annually.

Bank Credit Cards

Financial instruments issued by banks that allow cardholders to borrow funds with which to pay for goods and services, subject to the agreement that the funds will be repaid.

Credit Sales

Transactions in which goods or services are provided to a customer with the agreement that payment will be made at a later date.

Credit Card Sales

Transactions in which goods or services are purchased using a credit card, immediate revenue for the seller, albeit often with processing fees deducted by the credit card processor.