A Periodicity assumption E Full disclosure principle J Representational faithful

ID: 2491486 • Letter: A

Question

Periodicity assumption

Full disclosure principle

Representational faithfulness

Monetary unit assumption

Revenue recognition principle

Comparability (incl. Consistency)

Going concern assumption

Historical cost principle

Relevance

Economic entity assumption

Matching principle

Materiality

Timeliness

Conservatism

Provide the letter corresponding to the SINGLE, PRIMARY assumption, principle, or qualitative characteristic that corresponds with each of the following statements. Hint: Use one of these concepts (letters) twice and leave one of these unused.

A company transaction represents the completion of the earning process, and the related exchange amount is realized or realizable.

A company recognizes an accounts receivable allowance of $850,000 based on an analysis of existing accounts indicating that total uncollectible accounts will ultimately range from $750,000 and $850,000.

A company new in its industry adopts the “LIFO” inventory cost flow assumption after determining that the dominant firms in its industry have historically applied LIFO in their financial statements (FS).

In its FS, a company recognizes merchandise acquired for resale at amounts originally paid for it, unless market conditions indicate that expected selling prices will not be adequate to recover those costs.

Management issues a company’s FS within 30 days of the balance sheet date

A company’s functional currency is the appropriate means for measuring and reporting its economic affairs.

For expediency, a company’s records all purchases of office equipment costing less than $300 in the “office expense” account, rather than the “office equipment” account in its general ledger.

A company allocates the costs of equipment used in manufacturing goods it sells over the periods the company expects to use the equipment for this purpose, rather than expensing the costs immediately.

A company adopts an accelerated depreciation method because it better reflects the pattern of consumption of PP&E’s economic utility than does the straight-line depreciation method.

10.

A company’s FS set forth the accounting policy that managers used for recognizing revenue.

11.

Implicit in the company’s accounting policies and FS presentation is managers’ reasonable expectation that the company will continue to operate indefinitely.

12.

A company issues FS quarterly, even though its operating cycle is about 270 days.

13.

A company’s FS provide information about the bankruptcy of a significant customer that occurred after the date of the balance sheet but before managers issued the FS.

14.

A company resold for $2 million treasury stock it previously acquired for $1 million and reported the sale as an increase in stockholder equity, rather than as a gain.