ASSIGNMENT #1 (PAGE 107)

de Mesa, Christine Joy C. BSA-2nd year

1.The accountant of the entity keeps a detailed depreciation record on every

asset no matter how small its value.
Ans: Materiality

2.The owners of five-star hotel base its accounting records on the assumption
that the hotel might close any time.
Ans: Going Concern

3.A construction firm signed a three year contract to build a skyway

connecting Alabang and Tagaytay City. The firm immediately records the full
contract price as revenue.
Ans: Income recognition principle

4.An accounting practitioner mixes his personal accounting records with his
accounting practice.
Ans: Accounting Entity

5.Competition has taken away much of the business of an airline. The airline is
unwilling to report its plans to sell half of its fleet of aircraft.
Ans: Standard of Adequate Disclosure

6.A department store changes accounting method every year in order to

report a higher net income possible under accounting standards.
Ans: Comparability

7.Expenses are reported whenever the accountant records them rather than
when related revenues are earned.
Ans: Matching principle

8.Assets recorded at cost by a manufacturing entity are written up to their fair

value at the end of reporting period.
Ans: Conservatism
9.The damaged inventory of a department store is being written down. The
manager bases the write-down on his own subjective opinion in order to
minimize income tax.
Ans: Faithful Representation

10.After starting business, a mining entity keeps no accounting records. The

entity is waiting until the mine is exhausted to determine the success or
failure of the business
Ans: Time Period

ASSIGNMENT #2 (PAGE 113)

1. Timely financial information with predictive and confirmatory value is

presented.

Ans: Timeliness

2.Error-free financial information is presented.

Ans: Free from Error

3.The same accounting policies are applied from period to period.

Ans: Consistency

4.Financial statements are prepared annually.

Ans: Income Statement and Balance Sheet

5.Personal transactions of the owners should be distinguished from the

business transactions.

Ans: Economic entity assumption.

6.Entities are assumed to have a long life.

Ans: Going Concern

7.Assets are recognized at original acquisition cost.

Ans: Historical Cost

8.Notes to financial statements are prepared in order to have fair
presentation.

Ans: Faithful Representation

9.The annual depreciation is recognized.

Ans: Matching Principle

10. An allowable exception to the point of sale is the recording and reporting
of inflows at the end of production.

Ans: Revenue

11. All repair tools are expensed when purchased even though they have a
useful life of more than one year.

Ans: Relevance

12. A patent is capitalized and amortized over the period benefited.

Ans: Expense recognition principle or going concern assumption.

13. Rent paid in advance is recorded as prepaid rent expense.

Ans: Monetary Unit Assumptions

14. Events after the end of reporting period are either adjusted or disclosed.

Ans: Adjusting Event

15. The pesos today can buy as much goods and services as the five years ago.

Ans: Monetary Unit Assumptions