Week 2 Solutions - EXERCISE E2-2 (a) (b) (c) (d) (e) (f)...

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EXERCISE E2-2 (a) Comparability (b) Feedback Value (c) Consistency (d) Neutrality (e) Verifiability (f) Relevance (g) Comparability and Consistency (h) Reliability (i) Relevance and Reliability (j) Timeliness
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EXERCISE E2-4 (a) 6 Matching principle (b) 5 Historical cost principle (c) 7 Full disclosure principle (d) 2 Going concern assumption (e) 11 Conservatism (f) 1 Economic entity assumption (g) 4 Periodicity assumption (h) 10 Industry practices (i) 9 Materiality (j) 3 Monetary unit assumption
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EXERCISE E2-7 (a) (b) (c) (d) (e) (f) The answer to this situation is the same as (b). This entry violates the economic entity assumption. This assumption in accounting indicates that economic activity can be identified with a particular unit of accountability. In this situation, the company erred by charging this cost to the wrong economic entity. The historical cost principle indicates that assets and liabilities are accounted for on the basis of cost. If we were to select sales value, for example, we would have an extremely difficult time in attempting to establish a sales value for a given item without selling it. It should be noted that the revenue recognition principle provides the answer to when revenue should be recognized. Revenue should be recognized when realized or realizable and earned. In this situation, an earnings process has definitely not taken place. The company is probably too conservative in its accounting for this transaction. The matching principle indicates
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This note was uploaded on 02/19/2010 for the course ACC 421 taught by Professor Unknown during the Spring '10 term at University of Phoenix.

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Week 2 Solutions - EXERCISE E2-2 (a) (b) (c) (d) (e) (f)...

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