eeipnise cah bé dvided into artificial time periods. 8. Economic entity assumpti

Question

eeipnise cah bé dvided into artificial time periods. 8. Economic entity assumption 9. Full-disclosure principle h. Criteria usually satisfied for products at point of sale. i.Concerns the relative size of an item and its effect on decisions. E 1-10 Basic assumptions and principles LOI-7@ through LO1-9? Listed betow are several statements that relate to financial accounting and reporting. Identity the accounting concept that applies to each statement. Page 40 1. Jim Marley is the sole owner of Marley's Appliances. Jim borrowed $100,000 to buy a new home to be used as his personal residence. This liability was not recorded in the records of Marley's Appliances. 2. Apple Inc. distributes an annual report to its shareholders. 3. Hewlett-Packard Corporation depreciates machinery and equipment over their useful lives. 4. Crosby Company lists land on its balance sheet at $120,000, its original purchase price, even though the land has a current fair value of $200,000. 5. Honeywell International Inc. records revenue when products are delivered to customers, even though the cash has not 6. Liquidation values are not normally reported in financial statements even though many companies do go out of 7. IBM Corporation, a multibillion dollar company, purchased some small tools at a cost of $800. Even though the tools yet been received. business. will be used for a number of years, the company recorded the purchase as an expense. E 1-11 Basic assumptions and principles Identify the accounting concept that was violated in each of the following situations

Explanation / Answer

THE PRINCIPLE OR ACCOUNTING CONCEPT AFFECTED IS :

1. FULL DISCLOSURE PRINCIPLE

2.THE PERIODICITY ASSUMPTION

3.MATCHING PRINCIPLE AND GOING CONCERN PRINCIPLE

4.HISTORICAL COST

5. REVENUE RECOGNITION PRINCIPLE

6. GOING CONCERN ASSUMPTION

7. MATERIALITY

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