Question

Review the transactional information and identify the accounting assumption, principle, and or constraint to which it is related.

Select an option below to match with each question:

A) Time Period or Periodicity Assumption

B) Economic Entity Assumption

C) Fair Value

D) Revenue and Expense Recognition Principle

E) Revenue Recognition Principle

F) Cost principle

G) Full Disclosure Principle

H) Separate or Economic entity Principle

I) Expense Recognition Principle

1) The amount of goodwill recorded by a company that purchases another company is the amount equal to the purchase price less the net assets acquired. Hint: FASB now refers to the Matching Principle as the Expense Recognition Principle.

2) FASBs use of accrual accounting can be justified by the

3) Financial reporting must be done at defined time intervals or periods.

4) The use of public utilities to bring electricity to a business increases utility expense.

5) A parent company with subsidiaries reports via consolidated financial statements.

6) An allowance for doubtful accounts is used to reflect anticipated non-payment by some customers.

7) Revenue is recorded when contractual performance obligations have been satisfied.

8) Financial statements and other reports are meant to fully inform investors and potential investors so they can make more-informed investment decisions.

9) The owners of a business are distinct and separate from the business itself.

10) Intangible assets are amortized over the statutory or useful life, whichever is shorter.

*Just answer as much as you can. Thank you!

Answer 1

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A) Time Period or Periodicity Assumption	3) Financial reporting must be done at defined time intervals or periods.
B) Economic Entity Assumption	5) A parent company with subsidiaries reports via consolidated financial statements.
C) Fair Value	5) A parent company with subsidiaries reports via consolidated financial statements.
D) Revenue and Expense Recognition Principle	2) FASBs use of accrual accounting can be justified by the
E) Revenue Recognition Principle	7) Revenue is recorded when contractual performance obligations have been satisfied.
F) Cost principle	1) The amount of goodwill recorded by a company that purchases another company is the amount equal to the purchase price less the net assets acquired.
G) Full Disclosure Principle	8) Financial statements and other reports are meant to fully inform investors and potential investors so they can make more-informed investment decisions.
H) Separate or Economic entity Principle	9) The owners of a business are distinct and separate from the business itself.
I) Expense Recognition Principle	6) An allowance for doubtful accounts is used to reflect anticipated non-payment by some customers.