The following events/transactions took place in various companies in the year ending 31st December 2019.

The treatment in the books of accounts is as indicated:

i) Calvin Chemical Company faces possible expropriation (i.e. takeover) of foreign facilities and possible losses on sums owed by various customers on the verge of bankruptcy. The Company President has decided that these possibilities should not be noted on the financial statements because Calvin still hopes that these events will not take place.

ii) The treasurer of Piestengle Co. wishes to prepare financial statements only during the downturns in their wine production, which occur periodically when the rhubarb crop fails. He states that it is at such times that the statements could be most easily prepared. In no event would more than 30 months pass without statements being prepared

iii) Grab & Run, Inc., a fast food company, purchased assets on finance lease for Kshs.7,000,000 and paid Kshs.100,000 down payment and the rest on a15-year period remainder. The company accountant insists not to recognize such assets in the books since its a lease.

iv) The non-current assets of Daystar ltd purchased three years ago for sh. 22,000,000 have been entered in the books at sh.30,000,000 based on the current market value.

v) The accountant reflected in the books that debtors owe the firm Kshs.2,150,000. This happened despite knowing that one of the debtors had been declared bankrupt two years ago. The debtor owed the business Kshs.300,000.

vi) The accountant had deliberately not disclosed that the business had lost Kshs.500,000 following a robbery that took place during that year and that the money was not insured.

vii) Kelvin ltd has decided to depreciate its property on cost, plant on reducing balance method and equipments on cost.The accountant has also decided to depreciate some motor vehicles on hire purchase though no final instalment has been paid. viii) Delta Ltd. Closes its books of accounts as indicated above,in the course of your audit you discover the following:

a) The rent of sh.225,000 paid covers the period to 31st March 2020 as shown in the income statement presented by the company accountant.

b) Commission receivable of sh.90,000 out of sh.120,000 was only covering up to the end of September 2019, the company accountant is waiting for the whole amount to be received so as to recognize it.

c) Advertisement for the year is sh.84000, The accountant has recognized in the income statement only 70,000 that was paid as per the receipts presented.

Required: In each case:

A) State the Principle violated with reasons. (15 marks)

B) Suggest the effect it will have on financial statements. (10 marks)

C) Point out the quality of good accounting information that will be compromised. (10 marks)