Question 3 (15 marks)

Several reporting situations follow:

Tercek Company recognizes revenue during the production cycle. The price of the product and how many items will be sold are not certain.

In preparing its financial statements, Seco Company left out information about its cost flow assumption for inventories.

Martinez Company amortizes patents over their legal life of 20 years instead of their economic life, which is usually about five years.

Ravine Hospital Supply Corporation reports only current assets and current liabilities on its balance sheet. Long-term assets and liabilities are reported as current. The company is unlikely to be liquidated.

Barton Company reports merchandise inventory on its balance sheet at its current market value of $100,000. The inventory has an original cost of $110.000.

Bonilla Company is in its third year of operations and has not yet issued financial statements.

Watts Company has merchandise inventory on hand that cost $400,000. Watts reports merchandise inventory on its balance sheet at its current market value of $425,000.

Steph Wolfson, president of Download Music Company, bought a computer for her personal use. She paid for the computer with company funds and debited the Equipment account.

Sagoo Company decided not to implement a perpetual inventory system that would save $40,000 annually because the cost of the system was $100,000 and it was estimated to have a 10-year life.

Instructions

For each of the above, list what concept in the conceptual framework has been violated, if any.