Each of the following independent situations represents a departure from generally accepted accounting principles:
1. Value Properties owns a number of apartment buildings. In April 2013 a new building was purchased for $1,000,000. Because of the rapid increase in real estate prices, by the time Value's accountant recorded the purchase in July 2013, the estimated value of the property had increased to $1,200,000. The accountant decided to record the new building at $1,200,000.
2. Expat Imports International purchases products in the United States for resale in Canada. The goods they buy in the US are paid for in US dollars. In Expat's financial statements, each amount is identified as being in either US or Canadian dollars, for example as follows: Instructions
For each situation, (i) identify which principle has been violated, (ii) describe what the correct accounting treatment would be, and (iii) why the correct treatment provides better information.

Question

Each of the following independent situations represents a departure from generally accepted accounting principles:
1. Value Properties owns a number of apartment buildings. In April 2013 a new building was purchased for $1,000,000. Because of the rapid increase in real estate prices, by the time Value's accountant recorded the purchase in July 2013, the estimated value of the property had increased to $1,200,000. The accountant decided to record the new building at $1,200,000.
2. Expat Imports International purchases products in the United States for resale in Canada. The goods they buy in the US are paid for in US dollars. In Expat's financial statements, each amount is identified as being in either US or Canadian dollars, for example as follows:  Instructions
For each situation, (i) identify which principle has been violated, (ii) describe what the correct accounting treatment would be, and (iii) why the correct treatment provides better information.

Quizplus · Accepted Answer

The Answer of Each of the following independent situations represents a departure from generally accepted accounting principles:
1. Value Properties owns a number of apartment buildings. In April 2013 a new building was purchased for $1,000,000. Because of the rapid increase in real estate prices, by the time Value's accountant recorded the purchase in July 2013, the estimated value of the property had increased to $1,200,000. The accountant decided to record the new building at $1,200,000.
2. Expat Imports International purchases products in the United States for resale in Canada. The goods they buy in the US are paid for in US dollars. In Expat's financial statements, each amount is identified as being in either US or Canadian dollars, for example as follows:  Instructions
For each situation, (i) identify which principle has been violated, (ii) describe what the correct accounting treatment would be, and (iii) why the correct treatment provides better information.

Each of the Following Independent Situations Represents a Departure from Generally