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:

Bimodal

A distribution with two different modes (peaks) where the data shows two prevalent values.

Skewed

A distribution that is not symmetrical, where the bulk of values are concentrated to one side of the mean.

Innings

A division or segment of a game in sports like cricket and baseball, where one team takes turns batting and the other fields.

Histogram

A graphical representation of the distribution of numerical data, using bars to show the frequency of data in successive numerical intervals of equal size.