Need Help on GAAP Principles in Accounting?


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Guys im a bit confused could you help me with this so i could have an better idea:
1.How could a corporation owe itself? Comment using the appropriate
GAAP principle :)

2.You have received full payment amounting to $30,000 on December 2011 for items to be
delivered January 2012. When must you record the sale? Use the appropriate GAAP Principle in your answer.

3.What part of the Financial Statement is generally attributed to the working of the full-
Disclosure Principle? Explain your answer.

4.A parcel of land bought five years ago for Php 1million is now worth Php 3million .If you were to make the balance sheet today, what value would you reflect for the parcel of land and why? Use the appropriate GAAP Principle.
 
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bklynboy

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1. A corporation doesn't owe itself as all intercompany transactions are eliminated. Refer to FAS 94. More information needed to see if I am missing anything.

2. Record sale in 2012 upon delivery. GAAP guidance is SAB 104 and states that revenue is recognized when it is realized or earned. Earned means that the company has done what it needs to do to be entitled to the benefits of the sale. SAB 104 lists the conditions for being earned with one being "Delivery has occurred or services have been rendered".

3. The Full Disclosure Principle requires that all situations, circumstances and events that are relevant to financial statement users have to be disclosed. This is usually accomplished by having detailed footnotes that help the reader understand the companies financials as well as give an understanding of off balance sheet risks (such as litigation).

4. Depends on how land is being used. If its not held for sale then its at cost. If held for sale its lower of cost or FV less costs to sell. See ASC 360 and FAS 144 for FV treatment.
 

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