Would allow the expensing of all repair tools when

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Foundations of Business
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Chapter 15 / Exercise 023
Foundations of Business
Hughes/Pride
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5. _______________________ would allow the expensing of all repair tools when purchased, even though they have an estimated life of 3 years. 6. The ________________________ characteristic requires that the same accounting method be used from one accounting period to the next, unless it becomes evident that an alternative method will bring about a better description of a firm's financial situation. 7. ____________________ guides accountants to select the accounting treatment that is least likely to overstate income and assets. 8. Parenthetical balance sheet disclosure of the inventory method utilized by a particular company is an application of the _______________________ principle. 9. Corporations must prepare accounting reports at least yearly due to the _______________ assumption. 10. Recording and reporting inflows at the end of production is an allowable exception to the _________________ principle. Solution 2-138 1. Relevance; reliability 6. consistency 2. feedback value 7. Conservatism 3. Comparability 8. full disclosure 4. rational; systematic 9. periodicity 5. The materiality convention 10. revenue recognition Ex. 2-139—Basic assumptions. Briefly explain the four basic assumptions that underlie financial accounting. Solution 2-139 1. The economic entity assumption states that economic activity can be identified with a particular unit of accountability. 2. The going concern assumption assumes that a business enterprise will have a long life. 3. The monetary unit assumption means that money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis. In addition, the monetary unit remains reasonably stable. 4. The periodicity assumption implies that the economic activities of an enterprise can be divided into artificial time periods.
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Foundations of Business
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Chapter 15 / Exercise 023
Foundations of Business
Hughes/Pride
Expert Verified
Conceptual Framework Underlying Financial Accounting 2 - 29Ex. 2-140—Revenue recognition. Revenue is generally recognized at the point of sale. There are three exceptions, however. Name the time for each exception, give two qualifications or criteria for the use of each exception, and give an example for each exception. Solution 2-140 1. During production. The revenue is known (contract) or dependably estimable. Total costs are estimable or other means are available to estimate progress toward completion. Examples are long-term construction contracts and service-type transactions. 2. At completion. There are quoted prices. Units are interchangeable. There are no significant distribution costs. Examples are precious metals or agricultural products. 3. At collection. There is no reasonable basis for estimating the degree of collectibility. Costs of collection, bad debts, and repossessions are not estimable. Examples are installment sales and cost recovery method.

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