AMA201_Exercise_2_4

AMA201_Exercise_2_4 - d) Rationale why plant assets are not...

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Jesica Islas Intermediate Accounting 1 January 22, 2007 Professor A. Wu Chapter 2 Exercises on Chapter 2 Exercise 2-4 (Assumptions, Principles, and Constraints) Presented below are the assumptions, principles and constraints used in this chapter. 1. Economic entity assumption 2. Going concern assumption 3. Monetary assumption 4. Periodicity assumption 5. Historical cost principle 6. Matching principle 7. Full disclosure principle 8. Cost-benefit relationship 9. Materiality 10. Industry practices 11. Conservatism Instructions: Identify by number the accounting assumption, principle, or constraint that describes each situation below. Do not use a letter more than once. a) Allocates expenses to revenues in the proper period. 6. MATCHING PRINCIPLE b) Indicates that market value changes subsequent to purchase are not recorded in the accounts. (Do not use revenue recognition principle) 5. HISTORICAL COST PRINCIPLE c) Ensures that all relevant financial information is reported. 7. FULL DISCLOSURE PRINCIPLE
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Unformatted text preview: d) Rationale why plant assets are not reported at liquidation value. (Do not use historical cost principle) 2. GOING CONCERN ASSUMPTION e) Anticipates all losses, but reports no gains. 11. CONSERVATION f) Indicates that personal and business record keeping should be separately maintained. 1. ECONOMIC ENTITY ASSUMPTION g) Separates financial information into time periods for reporting purposes. 4. PERIODICITY ASSUMPTION h) Permits the use of market value valuation in certain specific situations. 10. INDUSTRY PRACTICES i) Requires that information significant enough to affect the decision of reasonably informed users should be disclosed. (Do not use full disclosure principle.) 9. MATERIALITY Jesica Islas Intermediate Accounting 1 January 22, 2007 Professor A. Wu Chapter 2 j) Assumes that the dollar is the measuring stick used to report on financial performance. 3. MONETARY UNIT ASSUMPTION...
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AMA201_Exercise_2_4 - d) Rationale why plant assets are not...

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