Accounting and Finance Foundations

Unit 5

Accounting and Finance Foundations Unit 5: Accounting Terminology 430

Accounting Terminology

Chapter 15

Lesson 15.6

Student Assignment

Culminating Project A

Newton Park is the largest amusement park on the East Coast and has thrill rides that defy gravity. Deter-

mine which of the 12 US GAAP accounting assumptions, principles, and constraints is violated in these

business transactions for Newton Park:

1. Newton Park purchased 500 T-shirts at a cost of $5.00 each. Newton Park plans to sell these
   T-shirts in their gift shops for $10.00 each. The T-shirts were recorded in the general ledger by
   increasing assets by $5,000 and decreasing cash by $5,000.


2. Newton Park has purchased $1,000,000 in Rides and Equipment since opening the park. If the
   Rides and Equipment were to be sold today, the estimated sales price is $500,000. Newton Park
   has plans for future growth because of record-breaking attendance. Newton Park is reporting the
   Rides and Equipment at an amount of $500,000.


3. Newton Park sold $250,000 of Season Passes during May and reported $250,000 at the time of
   sale in Theme Park Admissions Revenue.


4. Newton Park estimates that the cost of lanyards for season pass holders is only $.25 each. Newton
   Park records an increase to Lanyard Expense each time a lanyard is distributed to a season pass
   holder.


5. The president of Newton Park purchased a sports utility vehicle for $40,000 for personal use.
   Newton Park is reporting the cost of the SUV on the company financial statements.


6. A lawsuit was filed against Newton Park for a claimed injury in the amount of $600,000. Newton
   Park was in compliance with all safety standards and it is unlikely they will have to pay the claim.
   Newton Park has reported the claim of $600,000 on their financial statements as a liability.


7. When Newton Park purchases funnel cake ingredients for the concession stands, they sometimes
   record the purchases as an expense and sometimes they record the purchases as an asset.


8. Newton Park operates from May through August each year. Newton Park is considering waiting to
   record all of the seasons’ payroll expense until the end of the summer to make life easier for the
   accounting department. The employees have worked all summer operating the ticket booths, rides,
   gift shops and concessions.


9. Attendance at Newton Park was very low during the last week in August due to a large number of
   severe thunderstorms. Newton Park is considering issuing accounting statements for August 1-21
   instead of August 1-31. All other accounting statements have been issued on a monthly basis.


10. Newton Park recorded the value of a Bumper Car at $2,000 based on the Park Manager’s opinion.
    The Bumper Car was purchased at a cost of $5,000 based on the original invoice.

Name: _____________________________________________________ Date: ___________________