Presented below are a number of operational guidelines and practices that have developed over time.
Instructions
Identify the accounting assumption, accounting principle, or reporting constraint that most appropriately justifies these procedures and practices. Use only one item per description.
(a) The first note, “Summary of Significant Accounting Policies,” presents information on the sub classification of plant assets and discusses the company’s depreciation methods.
(b) The local hamburger restaurant expenses all spatulas, French fry baskets, and other cooking utensils when purchased.
(c) Retailers recognize revenue at the point of sale.
(d) Green Grow Landscape, Inc., includes an estimate of warranty expense in the year in which it sells its lawn mowers, which carry a 2 year warranty.
(e) Companies present sufficient financial information so that creditors and reasonably prudent investors will not be misled.
(f) Companies listed on U.S. stock exchanges report audited financial information annually and report unaudited information quarterly.
(g) Beach Resorts, Inc., does not record the 2004 value of $1.5 million for a piece of beach front property it purchased in 1989 for $500,000.
(h) Restaurant Supplies, Inc., takes a $32,000 loss on a number of older ovens in its inventory; it paid the manufacturer $107,000 for them but can sell them for only $75,000.
(i) Frito Lay is a wholly owned subsidiary of PepsiCo, Inc., and Frito Lay’s operating results and financial condition are included in the consolidated financial statements of PepsiCo. (Do not use full disclosure.)