The Following Are Independent Situations Observed by General Company's Senior

Essay

The following are independent situations observed by General Company's senior accountant at December 31, 2014, the company's year end. General Company has not adopted the revaluation model for accounting for long-lived assets.
1. General purchased land in February at a cost of $60,000 for the purpose of expanding the size of their parking lot, although this project has not yet been started at year end. Due to increases in real estate values, this land has a value of $100,000 by year end. An entry to record this increase in value has been recorded, crediting "Gain on Land".
2. One of the items making up General's total current assets of $354,000 is an amount of $1,400 for Supplies. The Company owner asks one of the accounting staff whether she thinks this balance is correct. The staff person takes two days of work time to count the actual supplies on hand and another day to research the exact cost of the items, and subsequently adjusts the balance of Supplies to its exact balance of $1,425. As a result of this task, the month-end financial statements are submitted to the company's lender two days after the reporting deadline.
3. A $96,300 payment for a 12 month insurance policy effective March 1 had been debited to the Insurance Expense Account.
4. Included in Accrued Interest Payable is interest on a $200,000, 3% note payable. Interest has been paid to the end of December 2, 2014. Accrued interest payable was calculated and recorded as $500 by applying the following formula: $200,000 x 3% x 1÷12. However the accountant was concerned because part of December's interest has already been paid and the formula included a full month's accrual. He therefore reduces the accrued interest payable by $33 ($200,000 x 3% x 2÷365).
5. On January 15, 2015, before the financial statement preparation for December 31, 2014 had been completed, a fire destroyed General's warehouse, which had a carrying value of $1,500,000, and inventory with a cost of $900,000. The lost assets are insured, but will result in a 6 month interruption in business while being reconstructed. No mention of this occurrence is found in the financial statements.
6. The company completed its year end inventory count and the controller noticed that obsolete inventory had been included in the physical count and that it was valued at its original cost less an obsolescent factor of 10%. When the controller asked how long the inventory had been on hand, he was told that it was 4 years old; most of their inventory is 6 months old.
Instructions
For each of the events, indicate the accounting assumption, concept, or constraint that has been violated and provide your reason. Prepare the correcting entry required, or if no entry is required, explain what other change, if any, should be made to ensure that General's financial statements comply with GAAP.