Chapter 1 Homework Solution and etc

Chapter 1 Homework Solution and etc - Chapter 1 Homework...

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Chapter 1 Homework Solution and etc. E 1-9 1. The economic entity assumption: Although Jim is the sole owner, his personal assets and liabilities should not be reported along with the business entity’s assets and liabilities. (page 28) 2. The periodicity assumption: The keyword here is “annual”. Corporations whose stocks are publicly traded, e.g. Apple, must issue financial reports to their shareholders periodically, for example every year. (page 28) Do you know what is Apple’s fiscal year-end? 3. The matching principle: Notice that I changed the wording of this question on Homework Manager. The practice of depreciating operating assets over an estimated life of, e.g. 40 years, is based on the going concern assumption (page 28). To depreciate or allocate the costs of machinery and equipment over the years that they are in use (‘useful years”) in a systematic and rational way is to match costs with revenue, the matching principle (page 30). 4. The historical cost principle: In general, a business entity should report its assets based on original transaction value (or historical cost) because historical cost is more verifiable or reliable. (page 29) ( You should know that departures from historical cost are not uncommon now . This is because “relevance” is emphasized more than “reliability” in current days.) Notice that if I change the wording of this question to: Corsby reports $80,000 gain, the difference between $200,000 the current market value and $120,000 the original purchase price for a piece of land, on its income statement, then the better answer for
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This note was uploaded on 11/28/2009 for the course BUSINESS acct 3211 taught by Professor Lin during the Winter '09 term at Calhoun Community College.

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Chapter 1 Homework Solution and etc - Chapter 1 Homework...

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