On July 1,the bank said it may lend money to Funny Books,Inc.,but only after it prepares an income statement for the month of July.Since the bank did not specify,Funny Books,Inc.did not follow generally accepted accounting principles (GAAP).It reported net income of $12,000 for the month ended July 31.The revenue included $4,000 of cash collected in advance from customers for services to be performed in August.The revenue also included a $3,000 increase in the value of its land.The expenses excluded $2,000 Funny Books owed for July services it received.
Part A: List the GAAP that were violated by Funny Books,Inc.and explain what the proper accounting treatment would be.
Part B: Net income in accordance with GAAP should have been $________.
Part C: Do you think the management of Funny Books,Inc.was acting unethically?
Why or why not?

Question

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The Answer of On July 1,the bank said it may lend money to Funny Books,Inc.,but only after it prepares an income statement for the month of July.Since the bank did not specify,Funny Books,Inc.did not follow generally accepted accounting principles (GAAP).It reported net income of $12,000 for the month ended July 31.The revenue included $4,000 of cash collected in advance from customers for services to be performed in August.The revenue also included a $3,000 increase in the value of its land.The expenses excluded $2,000 Funny Books owed for July services it received.
Part A: List the GAAP that were violated by Funny Books,Inc.and explain what the proper accounting treatment would be.
Part B: Net income in accordance with GAAP should have been $________.
Part C: Do you think the management of Funny Books,Inc.was acting unethically?
Why or why not?

On July 1,the Bank Said It May Lend Money to Funny