For Each of the Independent Situations Described Below, List the Assumption

question 22

Essay

For each of the independent situations described below, list the assumption, concept, constraint or recognition criteria that have been violated, if any. List only one term for each case.
1. Mark McDougal, MD, had the clinic accountant prepare his personal tax return. He paid the accountant using clinic funds and debited the clinic's "Professional Fees" account.
2. Won Company does not use an account for allowance for doubtful accounts. Instead, accounts receivable are written off directly to Bad Debt Expense if they remain unpaid after 24 months.
3. Equipment is carried at its fair value on the Fontaine Company balance sheet, which is $25,000 higher than cost. Fontaine Company has not adopted the revaluation model for accounting for long-lived assets.
4. Depreciation Expense for the Sobowski Company is $15,000. The company will have a net loss of $12,000 if the Depreciation is recorded, but a Profit of $3,000 if Depreciation is deferred a year. The decision is made to defer the Depreciation to next year which is expected to be more profitable.
5. The land of Krypto Company is appraised at $200,000 more than its cost. The new accountant for the company recommends booking the appraised value and showing a "Gain from Revaluation" on the Income Statement. Krypto Company has not adopted the revaluation model for accounting for long-lived assets.

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Definitions:

Balloons

Financial term referring to a lump-sum payment due at the end of a loan term or payment plan, typically much larger than the preceding installments.

Recover

The act of obtaining something lost or owed, especially compensation for an injury or loss through legal processes.

Portable Garages

Moveable structures designed to provide temporary or semi-permanent shelter for vehicles, typically made from materials like steel frames and fabric covers.

Recover Damages

The process of obtaining compensation from another party due to a loss or injury they caused.