For Each of the Following Situations Discuss Whether the Accounting

question 42

Essay

For each of the following situations discuss whether the accounting treatment is proper and,if not proper,what accounting principle is violated.Discuss the ethical and financial statement implications of each of the improper treatments.
A.A service company records revenue when cash is collected in advance of performing the service.
B.The owner used the cash received from a company bank loan to buy a car for his own personal use.The car was recorded as a company asset.
C.A company records revenue when earned even when the cash has not yet been received.
D.Land purchased ten years ago for $20,000 is reported on the balance sheet at its current value of $30,000.The company follows U.S.GAAP in preparing financial statements.
E.Inventory purchased last month and sold this month was deducted as an expense on this month's income statement.

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Definitions:

UCC Article 4A

Governs the transfer of funds via electronic means between banks and provides rules for electronic payment orders.

Commercial Electronic Fund Transfer

Electronic transactions between businesses for the purpose of transferring funds directly from one bank account to another.

Substitute Check

A negotiable instrument that is a paper reproduction of the front and back of an original check and contains all of the same information required on checks for automated processing.

Digital Image

A representation of a visual image in a format that can be stored, viewed, or transmitted electronically.