E13.4 Apply the concepts, principles, recognition criteria and constraint underlying accounting.

A number of accounting reporting situations are provided below.

(a) Tick Tock Ltd recognises revenue at the end of the production cycle but before sale has been made. The selling price as well as the quantity that can be sold are not certain.

(b) Cap, Caps and Hats Ltd is a medium-sized firm listed on the Australian and New Zealand securities exchanges. It is currently in its third year of operations; however, it has not issued one set of financial statements. (Hint: Do not use the full disclosure principle.)

(c) Books and More Ltd is carrying inventory at its current net realisable value of $90000. Inventory had an original cost of $110000.

(d) Aunty Janes Toy Emporium Ltd reports only current assets and current liabilities on its statement of financial position. Property, plant and equipment and bills payable are reported as current assets and current liabilities, respectively. Property, plant and equipment is reported at the amount for which it could be sold at short notice. Liquidation of the entity is unlikely.

(e) Surfs Up Ltd has inventory on hand that cost $400000. The entity reports inventory on its statement of financial position at its current net realisable value of $425000.

(f) Brad Spit, the manager of Top Time Movies Ltd, purchased a computer for his personal use. He paid for the computer with company funds and debited the Computers account.

Required

For each situation, explain whether a concept, principle, recognition criterion or constraint has been violated. Provide only one answer for each situation.