S-A E 260(Communication)
You have recently started to work for Payne Holmes, manufacturers of cemetery markers and monuments. During your first month at work, you inadvertently recorded as revenue, about $3,000 of prepayments from Tang Company. The financial statements had been released within the company when you discovered your error. The month-end closing had not been completed, however, and you were able to correct the accounts without incident.
Required:
Prepare a short note to accompany the re-released financial statements explaining the mistake.
GAAP QUESTIONs
1.Which of the following statements is
false
?
a.Under GAAP, the statement of financial position is usually referred to as the statement of assets and equity.
b.The FASB and IASB are working on a joint conceptual framework project.
c.Under IFRS, companies sometimes net liabilities against assets to report
"net assets".
d.Assets equals liabilities plus stockholders' equity.
2.A company has purchased a trust of land and expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. Under GAAP, the land should be reported as
a.a long-term investment.
b.an intangible asset.
c.property, plant, and equipment.
d.land expense.
3.Current assets under GAAP are listed generally
a.alphabetically.
b.by order of liquidity.
c.in the reverse order of their expected conversion to cash.
d.by importance.
4.Companies that use GAAP
a.do not have any guidelines as to what should be reported on their balance sheet.
b.generally reported current assets before non-current assets on their balance sheet.
c.often offset assets against liabilities and shown net assets and net liabilities on their balance sheet rather than the underlying detailed line items.
d.may report all their assets on their balance sheet at fair value.