Acct201 Chapt 1 Assg 2 - E 1-9 1. Pastel Paint Company is...

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E 1-9 1. Pastel Paint Company is in direct violation of the Historical Cost Principle, which states that asset and liability measurements should be based on original cost or payment in the exchange transaction. 2. Atwell Corporation has violated the periodicity assumption which presumes that a company’s life be divided into artificial time periods and to provide timely information in a fiscal year not to exceed 12 months. 3. Klingon Company is actually in violation of the realization principle which has two requirements in order to be in compliance. The first one states that the revenue should be recognized when the earnings process is virtually complete. And the second one states that there should be reasonable certainty concerning the collectability of the asset (usually cash). The critical event occurred at the point-of-sale when the order was received, but the delivery of the good has still not taken place. Thus, the transaction is incomplete. 4.
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This note was uploaded on 02/12/2012 for the course ECONOMICS 101 taught by Professor Obiene during the Spring '11 term at Essex County College.

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Acct201 Chapt 1 Assg 2 - E 1-9 1. Pastel Paint Company is...

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