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Ch 2-1 HW Solutions - Intermediate Accounting I ACCT...

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Intermediate Accounting I – ACCT 3113-01 – Fall 2010 Chapter 02-1 Homework BRIEF EXERCISE 2-2 (a) Verifiability (b) Comparability (c) Consistency (d) Timeliness BRIEF EXERCISE 2-3 (a) Equity (b) Revenues (c) Equity (d) Assets (e) Expenses (f) Losses (g) Liabilities (h) Distributions to owners (i) Gains (j) Investments by owners BRIEF EXERCISE 2-4 (a) Periodicity (b) Monetary unit (c) Going concern (d) Economic entity BRIEF EXERCISE 2-5 (a) Revenue recognition (b) Expense recognition (c) Full disclosure (d) Historical cost BRIEF EXERCISE 2-6 Investment 1—Level 3 Investment 2—Level 1 Investment 3—Level 2 BRIEF EXERCISE 2-7 (a) Industry practices (b) Conservatism (c) Cost-benefit relationship (d) Materiality
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BRIEF EXERCISE 2-8 Companies and their auditors for the most part have adopted the general rule of thumb that anything under 5% of net income is considered not material. Recently, the SEC has indicated that it is okay to use this percentage for the initial assessment of materiality, but other factors must be considered. For example, companies can no longer fail to record items in order to meet
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