Question

Joyful Gas Company an independent oil producer in Dallas, Texas. In March, company geologist discovered a pool of oil that tripled the company’s proven reserves. Prior to disclosing the new oil to the public, Joy Gas Company quietly bought most of its stock as treasury stock. After the discovery was announced, the company’s stock price increased from $5 to $28.
Please discuss and answer at least two the following questions:________.
1. What accounting principle is involved?
2. Who are the stakeholder’s?

Answer 1

Answer: 1. Full Disclosure

2. Please refer to Explanation

Explanation:

1. The Full Disclosure Principle in Accounting was enacted to reduce the Information Assymetry between the Management of a company and it's shareholders. Under this Principle, the company should endeavour to disclose any transaction or event that could materially affect the company's financial position by stating it in their financial statements as either an entry or a footnote. Joyful Gas Company should state the discovery of the oil as well as their efforts at repurchasing Treasury stock.

2. The Stakeholders in a company refer to any and all people or entities who have an interest in the company. This includes the Shareholders, the Government, creditors, employees, suppliers, the general public etc.