Author Question: The most common biometric devices perform retinal eye scans. Indicate whether the statement is ... (Read 38 times)

Chloeellawright · **on:** Jul 5, 2018

The most common biometric devices perform retinal eye scans.
Indicate whether the statement is true or false

Question 2

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?
Fill in the blanks with correct word

pangili4 · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

F

Answer to Question 2

Part A: Funny Books, Inc. violated the revenue-recognition principle by recording revenue in advance of performing the services. It also violated the cost principle because land should not be increased to reflect its fair market value. Lastly, the matching principle was violated because it should have reported the July services received as expenses in the period it received the services regardless of the fact that cash had not changed hands.
Part B: Net income = 3,000 = 12,000 4,000 3,000 2,000
Part C: Management should put ethical behavior above trying to make the company look better financially. Management should have been forthright with the bank and clarified whether the income statement was to be prepared in accordance with GAAP. It should have followed the full disclosure requirement and specified how it accounted for its transactions.