Each of the Following Independent Situations Represents a Departure from Generally

question 126

Essay

Each of the following independent situations represents a departure from generally accepted accounting principles:
1. Value Properties owns a number of apartment buildings. In April 2013 a new building was purchased for $1,000,000. Because of the rapid increase in real estate prices, by the time Value's accountant recorded the purchase in July 2013, the estimated value of the property had increased to $1,200,000. The accountant decided to record the new building at $1,200,000.
2. Expat Imports International purchases products in the United States for resale in Canada. The goods they buy in the US are paid for in US dollars. In Expat's financial statements, each amount is identified as being in either US or Canadian dollars, for example as follows: Instructions
For each situation, (i) identify which principle has been violated, (ii) describe what the correct accounting treatment would be, and (iii) why the correct treatment provides better information.

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Definitions:

Deuteranopia

A color vision deficiency causing difficulty distinguishing between red and green colors.

Opponent-process Color Coding

a theory of color vision that suggests colors are perceived in terms of opposing pairs: red-green, blue-yellow, and black-white.

Lateral Geniculate Nucleus

A structure in the brain that is part of the thalamus; it acts as a primary processing center for visual information received from the retina.

Cones

Photoreceptor cells in the retina of the eye responsible for color vision and functioning best in relatively bright light.