Determine what gaap each scenario relates to

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Reference no: EM132783255

Question 1: Read each scenario. Determine what GAAP each scenario relates to, and what should be done. (Choose from The Consistency Principle, The Materiality Principle, and The Full Disclosure Principle)

Scenario One: Montgomery Burns believes investing in Homer Donuts is an "Excellent" idea since it makes so much money. Unfortunately, Homer has not disclosed in his financial statements that the company is being sued for $100 million dollars. What advice would you give?

Scenario Two: Homer's Donuts has a Net Income of $50 million dollars a year. After it releases its 2019 Financial Statements it is discovered that a $1,000 sales invoice was not included. Should the company redo their financial statements?

Scenario Three: Homer Donuts records its revenue when it receives payment. Because Homer has trouble collecting his debt (he's too busy eating, sleeping and drooling over donuts), the company decides to change its policy and record revenue as soon as it issues the bill. This makes the company look more profitable. Is this allowed?

Reference no: EM132783255

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