Question

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Brief Exercise 2-10 For each item that follows, identify the foundational principle of accounting that best describes it. (a) For its annual reports, Sumsong Corp. divides its economic activities into 12-month periods (b) Sullivan, Inc., does not adjust amounts in its financial statements for the effects of inflation (c) Kiran Ltd. reports current and non-current classifications in its statement of financial position (d) In preparing its consolidated financial statements, Paddy Corporation assesses whether it has the power to direct (e) Jaspreet Corporation reports revenue in its income statement when it is earned, even if cash has not been (f) Duong Enterprises normally includes business transactions in its general ledger when the item meets the (g) Gomez, Inc., provides information about pending lawsuits in the notes to its financial statements (h) D&H Farms reports land on its statement of financial position at the amount paid to acquire it, even though the (i) King Corporation uses fair value measurements for its financial instruments portfolid (j) Magic Inc. assumes that it will continue to operate into the foreseeable future (k) Donaldson Corp. operates a chain of restaurants and divides its fiscal year into 13 four-week accounting periods Matching Economic entity Going concern Revenue recognition Periodicity Monetary unit Full disclosure Recognition Fair value Control Historical cost the other entity's activities collected definition of an element (as defined in the conceptual framework) and the item is measurable estimated fair value is higher

Answer 1

a) Periodicity - For accounting purpose ,activities  of entity is divided into periods.

b) Monetary unit - As per this assumption ,Change in price is ignored

c) Going concern - Business will continue for long time period.

d)Control - Determine percentage of control over other entity activities.

e)Revenue recognition - As per this principle ,revenue is recorded even if not received.

f)Monetary unit - Only those transactions are recorded which are expressed in monetary terms.

g)Full disclosure - Make disclosure of all information and facts in notes to financial statement which are considered necessary for decision making.

h)Historical cost - Record the asset at acquired price.

i)Fair value - Record the transactions at fair value

j)Going concern - Business will continue for long time period.

k)Periodicity - divide business into artificial time period.