The following situations involve accounting principles and assumptions.
1. Julia Company owns buildings that are worth substantially more than they originally cost.
In an effort to provide more relevant information, Julia reports the buildings at fair value in its accounting reports.
2. Dekalb Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Omar Shariff, president of Omar’s Oasis, records his personal living costs as expenses of the Oasis.
Instructions:
For each of the three situations, state if the accounting method used is correct or incorrect.
If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.