Financial statements are prepared according to a number

of accounting #4984
Financial statements are prepared according to a number of accounting principles, some of
which are listed below:1. Business entity2. Going concern 3. Monetary unit 4. Historical cost 5.
Recognition6. Consistency7. Full disclosure8. Matching9. MaterialityRequired: Identify the
principle that would apply in each of the following situations. Explain your choice.___________
a. An accountant for Caldwell Corporation records a $25 stapler with a five year life as an
expense. Caldwell has total assets of $1,000,000. ___________ b. Fred Rozak, an independent
consultant, must keep a set of books for his consulting firm and a separate set of books for his
personal records.___________ c. A machine is recorded at its purchase price of $9,000 and is
not revalued at the end of the accounting period to reflect its market value of
$10,000.___________ d. An asset purchased in 1985 for $10,000 is not revalued even though it
would take $30,000 in equivalent money to purchase the land today.___________ e.
Accountants of Hull Corporation do not record the value of its equipment at the much lower
amount for which it could be sold in the near future.___________ f. Investors of Spellman
Corporation note that the accounting policy for valuing inventory has not changed from the prior
fiscal year.___________ g. Looten Corporation senior managers decide to disclose a recent $2
million lawsuit in a note to the financial statements even though the case will not likely be settled
for two yearsView Solution:
Financial statements are prepared according to a number of accounting

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