The following situations involve accounting principles and assumptions. for each of the three situations, say if the accounting method used is correct or incorrect. if correct, identify which principle or assumption supports the method used. if incorrect, identify which principle or assumption has been violated. accounting method principle/assumption 1. sosa company owns buildings that are worth substantially more than they originally cost. in an effort to provide more relevant information, sosa reports the buildings at fair value in its accounting reports. 2. mays company includes in its accounting records only transaction data that can be expressed in terms of money. 3. curt russell, owner of curt’s photography, records his personal living costs as expenses of the business.

Milden company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. as an aid in planning, the company has decided to start using a contribution format income statement. to have data to prepare such a statement, the company has analyzed its expenses and has developed the following cost formulas: cost cost formula cost of good sold $35 per unit sold advertising expense $210,000 per quarter sales commissions 6% of sales shipping expense ? administrative salaries $145,000 per quarter insurance expense $9,000 per quarter depreciation expense $76,000 per quarter management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. units sold and the related shipping expense over the last eight quarters follow: quarter units sold shipping expense year 1: first 10,000 $ 119,000 second 16,000 $ 175,000 third 18,000 $ 190,000 fourth 15,000 $ 164,000 year 2: first 11,000 $ 130,000 second 17,000 $ 185,000 third 20,000 $ 210,000 fourth 13,000 $ 147,000 milden company’s president would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter. required: 1. using the high-low method, estimate a cost formula for shipping expe