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Assume the following information regarding company Automobile that manufactures machinery:

a. Automobile is being sued for 2,000,000 by its customers for damage caused to them by Automobile s products. The amount is regarded considerable, and Automobile is not insured. The Automobile has not disclosed the suit in its recent financial statements arguing that no settlement has been reached with its customers.

b. Automobile purchased an equipment for 3,000,000 (a considerable amount). Automobile recorded the purchase as an expense.

c. XT is the major shareholder of Automobile . The company paid an amount of 2,000 for personal expenses of XT. The company recorded the amount as an expense.

d. Automobile received an order of 2,000,000 (a material amount) from customer. Automobile recorded the amount as a revenue the day received the order.

e. Automobile has not prepared and has not published financial statements for over four years.

f. Automobile purchased a piece of machinery at a price of 400,000. An independent evaluator estimated the market value of the machinery at the purchase date at

500,000. The company recorded the value of the machinery at the day of purchase in the amount of 500,000.

Identify the accounting that was violated in each of the above situations. (consider each case independently)

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