Question

Presented below are a number of accounting procedures and practices at Link Software Inc. For each of these items, list the assumption, principle, quality, or modifying convention that is violated. 1. Link Software decides to establish a large loss and related liability this year because of the possibility that it may lose a pending patent infringement lawsuit. The possibility of loss is considered remote by its attorneys. 2. The president of Link Software, believes it is unnecessary to report financial information on a yearly basis. Instead, the president believes that financial information should be disclosed only when significant new information is available related to the company's operations. 3. An officer of Link Software leased a new car for personal use with company money, charging travel expense. 4. A machine, that cost $150,000, is reported at its current market value of $155,000. 5. Link Software's income is high this year, a switch from straight-line depreciation to accelerated depreciation is made this year.

Answer 1

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Answer: particulars violation - Matching concept (also conservatism) I. Link software decides Loss & related Isability the possibility that it patent infringement of loss is considered attorneys to establish a large this year because of may lose a pending lawsuit. The possibility remote by its 2. periodicity The president of link software believes it is onnessary to report financial information on a yearly basis. Instead, the president believes that financal information should be disclaed only when significant new information is a voulabie related to company's Opera Kons Economic Entity 3. An officer of link software leased a new car for personal use with company money, Charging travel expense. 4. A machine at its that corrent cost $ 150000 is market value of reported $ 155000 Historical cost Calso, devenue * recognition). 5. Link software income a switch from Straight accelerated depreciation as high this year, line Depreciation to is made this year consistency. Note : - Reporting the asset at FMN of & 155000 implies the following entry : Machine All or $5000 TO Revenue Alc $ 5000