For each of the independent situations described below, list the assumption, characteristic, concept, or constraint that has been violated, if any. List only one term for each case.
1. McHale Company reports only current assets and current liabilities on its balance sheet. Intangible assets and a 20-year mortgage payable are reported as a current asset and a current liability, respectively. Liquidation of the company is unlikely.
2. Fizzard Company is in its third year of operation and has yet to issue financial statements. (Do not use full disclosure principle.)
3. Harris Company is carrying inventory at its net realizable value of $110,000. The inventory had an original cost of $135,000.
4. Martin Company expenses some office equipment that is inexpensive even though it has useful life that exceeds 1 year.
5. Singh Corporation has selected FIFO as its inventory cost flow formula during the current year. Next year it plans to change to the weighted average cost formula.

Question

Quizplus · Accepted Answer

The Answer of For each of the independent situations described below, list the assumption, characteristic, concept, or constraint that has been violated, if any. List only one term for each case.
1. McHale Company reports only current assets and current liabilities on its balance sheet. Intangible assets and a 20-year mortgage payable are reported as a current asset and a current liability, respectively. Liquidation of the company is unlikely.
2. Fizzard Company is in its third year of operation and has yet to issue financial statements. (Do not use full disclosure principle.)
3. Harris Company is carrying inventory at its net realizable value of $110,000. The inventory had an original cost of $135,000.
4. Martin Company expenses some office equipment that is inexpensive even though it has useful life that exceeds 1 year.
5. Singh Corporation has selected FIFO as its inventory cost flow formula during the current year. Next year it plans to change to the weighted average cost formula.

For Each of the Independent Situations Described Below, List the Assumption