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

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

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