For each of the situations described below, identify the concepts which are relevant and decide how the item should be treated in the accounts giving your reasons: (i) A has incurred large losses on uncollectible loans which called for repayment over the next ten years. A proposes to depreciate the losses over the ten year period to which they relate. (ii) B is being sued by another company for illegal practices. The case is ongoing but likely to conclude that B was liable. No adjustment has been made in the accounts for this possible loss. (iii) C is an hotel. It receives bookings for its rooms up to a year in advance. Revenue is recognized as soon as bookings are confirmed in writing. (iv) D has a policy of revaluing its plant and machinery each year at realizable value. The change is then used as the depreciation figure.

(v) E built an hotel with 500 rooms. All materials and furnishings with an individual cost of less than 100 were written off immediately as an expense. There were some 100 such items per room. (vi) F has changed its depreciation policy to write assets off over 12 years instead of the six years that it considers more appropriate to bring its depreciation into line with other companies in the industry. (vii) G estimates that its executives stayed on average for four years with the company before moving on for more experience. It therefore depreciates the cost of the initial training programme (which all executives undertake) over a four year period. (viii) H paid for a custom made machine which is impossible to remove being imbedded in concrete. The company hopes to use it for ten years but as it is so immovable and specific to the company the cost has been written off immediately. (ix) I can borrow a maximum 50 per cent of its assets. It has insufficient assets to provide cover for a much needed loan and has therefore included in its accounts some securities owned personally by the main shareholder (x) J is a mining business. It has discovered that one of its mines has much larger reserves of ore than was originally thought. The increase in value has been credited to profit in the year in which it was discovered. (xi) K is a theatre. A major new show has attracted bookings well in advance. These have been credited to income as they are received. (xii) L. has estimated its doubtful debts provision by taking the previous years' experience of bad debts and doubling it to make sure that there is no under provision.