Reference no: EM132675804

Question - Amortization expense on the building for the year was 60,000. Because the building was increasing in value during the year, the controller decided to charge the amortization expense to retained earnings instead of to net income.

Retained earnings 60,000

Accumulated amortization 60,000

User is a potential investor who is looking the financial statements to decide whether or not to invest in this company.

1) What is the Financial Accounting issue? (ie. recognition, measurement, presentation, disclosure)

2) Identify and explain the accounting practice violation(s) with reference to the Conceptual Framework for Financial Reporting ('Pyramid' Illustration in Kieso textbook)

3) Identify implications to the users of the financial statements

4) Explain briefly how you would "fix" the problem from a "Proper Accounting Practice" perspective. Provide the correct Journal Entry if possible.