Question

Name: ID #: 2. Instructions: Each of the situations below may illustrate a violation of an accounting assumption or principle. Indicate the assumption or principle that is most clearly violated using the following codes: Codes A. Economic entity assumption B. Monetary unit assumption C. Time period assumption D. Going concern assumption E. Revenue recognition principle F. Matching principle G. Materiality H. Full disclosure principle L. Cost principle J. Conservatism K. No violation of operating guidelines Situations 1. Stockholders invested an additional S60,000 cash in the business in 2007. This investment was 2. Larson Paperweigh 3. Pandl Company reports its inventory at cost when current replacement cost is significantly below 4. Kailcy's Novelties has 100,000 whistling dolls in inventory at a cost of S5 cach. Only cight were reported as revenue on the 2007 income statement. ts values the marble it has on han d at its expected selling price since thisis its expected valuc to the business. The marble's expected selling price exceeds the pricc Larson paid for it cost.l sold last month. Not wanting to write off this inventory and report a loss, Kailey has decided not to issuc financial statements until at least half of the dolls have been sold. 5. Zenger's Pizza is being liquidated because it has sustained losses for many ycars. It continues to 6. Kim Pcnkins, president of Peakins Machincry, took a power saw out of inventory to use as a 7. Blake Industries has developed an automobile engine that will run on sea water instead of gasoline, depreciate its assets and prepare financial statements on the cost basis. birthday present for his son. Supplies expense was debited. while providing cqual performancc. They have chosen not to release reports of this engine to the public. Minton Company made no entry to record depreciation on its equipment for 2007 Stevens Brokerage bought each of its 5,000 employees new staplers for their desks. Each stapler cost S10 and was decorated with the company's logo. Since Stevens expenses all assets costing less than S25, no asset was recorded. Using the following codes, classify each of the items listed below as either an assumption, a principle, or a constraint. 8. 9.

Answer 1