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Exercise 2-13
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Your answer is incorrect. Try again. |
Garcia Co. had three major business transactions during 2014.
In each situation, identify the assumption or principle that has been violated.
| Violation | ||||
| (a) | Historical cost Princi-principle periodicity-Tio economic entity assumption |
Reported at its fair value of $260,000 merchandise inventory with a cost of $208,000. | ||
| (b) | Historical cost principle economic entity assumption periodicity assumption |
The president of Garcia Co., Sal Garcia, purchased a truck for personal use and charged it to his expense account. | ||
| (c) | Historical cost principle economic entity assumptionPeriodicity assumption |
Garcia Co. wanted to make its 2014 income look better, so it added 2 more weeks to the year (a 54-week year). Previous years were 52 weeks. |
Expert Answer
| a | Historical cost principle |
| b | Economic entity assumption |
| c | Periodicity assumption |
