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Garcia Co. had three major business transactions during 2014.
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Question & Answer: Exercise 2-13…..
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In each situation, identify the assumption or principle that has been violated.
|(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.|
|a||Historical cost principle|
|b||Economic entity assumption|