CONCEPTS AND PRINCIPALS
Accounting principles are broad guides to accounting practice. (a) How do these principles differ from
the principles relating to the physical sciences? (b) Of what significance is acceptability in the
development of accounting principles? (c) Why must accounting principles be continually reexamined
What role does the Financial Accounting Foundation play in the development of accounting
What body is currently dominant in the development of (a) generally accepted accounting principles
for business enterprises and (b) principles for state and municipal governments?
For accounting purposes, what is the nature of the assumption as to the length of life of an enterprise?
Plant assets are reported on the balance sheet at a total cost of $500,000, less accumulated
depreciation of $300,000. (a) Is it possible that the assets might realize considerably more or
considerably less than $200,000 if the business were discontinued and the assets were sold separately?
(b) Why aren't plant assets reported on the balance sheet at their estimated market values?
During the current year, a mortgage note payable for $250,000, issued by Parson Company 10 years
ago, became due and was paid. Assuming that the general price level had increased by 50% during the
10-year period, did the loan result in an increase or a decrease in Parson Company's purchasing
A machine with a cost of $75,000 and accumulated depreciation of $60,000 will soon need to be
replaced by a similar machine that will cost $125,000. (a) At what amount should the machine
presently owned be reported on the balance sheet? (b) What amount should management use in
planning for the cash required to replace the machine?
During July, merchandise costing $150,000
was sold for $225,000 in cash. Because the purchasing
power of the dollar has declined, it will cost $160,000 to replace the merchandise. (a) What is the
amount of gross profit in July? (b) Assuming that all operating expenses for the month are paid in
cash and that the owner withdraws cash in the amount of the net income, would there be enough cash
remaining from the $225,000 of sales to replace the merchandise sold? Discuss.
Conventional financial do not give recognition to the instability of the purchasing power of the dollar,
How can the effect of the fluctuating dollar on business operations be presented to the users of the
What is the current cost of an asset?
If land was purchased for 80,000 when the general level index was 220, and price level index has risen
242, what Is the constant dollar equivalent of the original cost of the land?