The following cases relate to the valuation of assets. Consider the case independently.
(a) World Wide Travel Agency has office supplies costing $1,400 on hand at the balance sheet date. These supplies were purchased from a supplier that does not give cash refunds. World-Wide’s management believes that the company could sell these supplies for no more than $500 if it were to advertise them for sale. However, the company expects to use these supplies and to purchase more when they are gone. In its balance sheet, the supplies were presented at $500.
Solution:
Using the Generally accepted accounting principles (GAAPs) the most appropriate balance sheet amount should be $1,400 and not $500. This recording violate the historical cost principle which states that all accounting entries should be reported at their original cost. This principle also requires that assets……………Get the full answer for just $1