Reference no: EM132623584

Question 1: Identify the accounting concept or principle involved in each case.

Question 2: Determine whether the accounting concept is violated or applied. Choose Applied if the accounting concept is applied otherwise choose Violated.

BASIC ACCOUNTING CONCEPTS ARE:

Separate Entity Concept

Historical Cost Concept

Going Concern Assumption

Matching Principle

Accrual Basis of Accounting

Prudence (or conservatism)

Time Period

Stable Monetary Unit

Materiality Concept

Cost - benefit (Cost Constraint)

Full disclosure

Consistency Concept

1. ATR company borrowed P100,000 in December and will make its only payment for interest when the note comes due six months later. The total interest for the six months will be P3,600. On the December income statements the accountant reported interest Expense of P600
2. Eudonote Company has always expensed items under P100, even if they have a useful life of over one year.
3. Gulia company purchase a parcel of land on which to build a new factory. The company recorded the property at the amount of cash given to acquire it.
4. A business acquired goods that are held for resale. Instead of expensing immediately the cost of the goods, the business initially recognized them as assets. As each goods is sold, the business recognizes the cost of the good sold as expense.
5. Topico Company purchased two calculators costing P800 each. The entity charges the cost of one of the calculators as expense but recognizes the cost of the other calculator as asset.
6. Duterte Corporation has a division in China. Prior to preparing the financial statements for the company and all of its foreign divisions, the Chinese Ministry of Finance announced a possible devaluation (decreased in value) of the Yuan (monetary currency of China) for the incoming year. Since this has not yet happened, Duterte Corporation did not include this information in this year's financial statements.
7. A business exported goods and collected the sale price in U.S dollars. When financial statements are prepared, the business translates the dollars into pesos.
8. Gretchen Enterprises is now in its 30th year of business. The founder of the company Greg Martin Diaz, is planning to retire at the end of the year and turn the business over to his daughter. The financial statements for this year are therefore restated such that it appears that the business will be ending at the end of this year.
9. Entity Rack purchased inventories for P100,000. Entity Rack expects to sell the inventories for P120,000 and therefore records the inventories at P120,000 rather than at P100,000
10. Phylbert Angellie enters into an agreement to operate a new business in partnership with her friend, Gerald Randolph. Each partner will make an initial cash investment of P10,000. Phylbert Angellie opens a checking account in the name of the partnership and transfers P10,000 from her personal account into the newly-opened checking account mentioned earlier.