For each of the following situations, state whether you agree or disagree with the financial reporting practice employed, and briefly explain the reason for
your answer.
a) Panther Corporation's accountant increased the book value of a patent from its original cost of $1 million to its recently appraised value of $6
million.
b) Hartford Corporation paid for the personal travel of its chief financial officer and charged travel expense.
c) At the end of its 2021 fiscal year, TNP, Inc., received an order from a customer for $60,000. The merchandise will ship early in 2022. Because the
sale was made to a long-time customer and the invoice was paid in 2021, the controller recorded the sale in 2021.
d) In the middle of its 2021 fiscal year, Sagitta Inc. paid $12,000 to its insurance company for one-year comprehensive insurance coverage. Sagitta
recorded the entire expenditure as an expense in 2021.
e) The Windmill Pharmaceutical Company included a note in its financial statements that described a pending lawsuit against the company.
f) The ABC Corporation, a company whose securities are publicly traded, prepares monthly, quarterly, and annual financial statements for internal use but
disseminates to external users only the annual financial statements.
Sample Solution