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ACCT3000IntermediateFinancial Accounting ISolution to Suggested Problems 7th Edition 1
Chapter 1Problems:Exercise 1–9List AList Bd 1.Matching principlea.The enterprise is separate from its owners and other entities.g 2.Periodicityb.A common denominator is the dollar.e 3.Historical cost principlec.The entity will continue indefinitely.i 4.Materialityd.Record expenses in the period the related revenue is recognized.h 5.Realization principlee.The original transaction value upon acquisition.c 6.Going concern assumptionf.All information that could affect decisions should be reported.b 7.Monetary unit assumptiong.The life of an enterprise can be divided into artificial time periods.a 8.Economic entity assumptionh.Criteria usually satisfied at point of sale.f 9.Full-disclosure principlei.Concerns the relative size of an item and its effect on decisions.Exercise 1–111.The historical cost (original transaction value) principle2.The periodicity assumption3.The realization (revenue recognition) principle4.The economic entity assumption5.The matching principle; materiality6. The full disclosure principleExercise 1–121. Disagree —Monetary unit assumption2.Disagree—Full disclosure principle3.Agree—The matching principle4.Disagree—Historical cost (original transaction value) principle5.Agree—Realization (revenue recognition) principle6. Agree—Materiality2
7.Disagree—Periodicity assumptionSupplement:Exercise 1–7List AList Bo 1.Predictive valuea.Decreases in equity resulting from transfers to owners.h 2.Relevanceb.Requires consideration of the costs and value of information.g 3.Timelinessc.Important for making interfirm comparisons.a 4.Distribution to ownersd. Applying the same accounting practices overtime.j 5.Confirmatory valuee.Users understand the information in the context ofthedecision being made.e 6.Understandabilityf. Agreement between a measure and thephenomenon itpurportstorepresent.n 7.Gaing.Information is available prior to the decision.f 8.Faithful representationh.Pertinent to the decision at hand.k 9.Comprehensive incomei.Implies consensus among different measurers.p 10.Materialityj.Information confirms expectations.c 11.Comparabilityk.The change in equity from nonowner transactions.m 12.Neutralityl. The process of admitting information intofinancial statements.l 13.Recognitionm.The absence of bias.d 14.Consistencyn.Results if an asset is sold for more than its book value.b 15.Cost effectivenesso.Information is useful in predicting the future.i 16.Verifiabilityp.Concerns the relative size of an item and its effecton decisions.Exercise 1–131.Disagree —This is a violation of the historical cost (originaltransaction value) principle.2.Disagree—This is a violation of the economic entity assumption.3.Disagree—This is a violation of the realization (revenue recognition)principle.3
4.Agree—The company is conforming to the matching principle.5.Agree—The company is conforming to the full disclosure principle.6.