Accounting OPERATING GUIDELINES????

Question

Instructions: Each of the situations below may illustrate a violation of operating guidelines. Designate the guideline 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
I. Cost principle
J. Conservatism
K. No violation of operating guidelines

Situations

_____ 2. Dennis Paperweights values the marble it has on hand at its expected selling price since this is its expected value to the business. The marble's expected selling price exceeds the price Dennis paid for it.
_____ 3. Torrey Company reports its inventory at cost when current replacement cost is significantly below cost.
_____ 4. Holton's Novelties has 100,000 whistling dolls in inventory at a cost of $5 each. Only eight were sold last month. Not wanting to write off this inventory and report a loss, Holton has decided not to issue financial statements until at least half of the dolls have been sold.
_____ 5. Cooper's Pizza is being liquidated because it has sustained losses for many years. It continues to depreciate its assets and prepare financial statements on the cost basis.

_____ 7. Golden Industries has developed an automobile engine that will run on sea water instead of gasoline, while providing equal performance. They have chosen not to release reports of this engine to the public.
_____ 8. Ron Martin made no entry to record depreciation on its equipment for 2005.
_____ 9. Simon Brokerage bought each of its 5,000 employees new staplers for their desks. Each stapler cost $10 and was decorated with the company's logo. Since Simon expenses all assets costing less than $25, no asset was recorded.
_____ 10. Baxter Lumber Company lost all of its standing timber due to a major forest fire in January of 2006. The trees were not insured. No mention was made of this loss in Baxter's 2005 financial statements, since the trees were still growing on December 31, 2005.

Answer 1

Best Answer - Chosen by Asker

__I___ 2. Dennis Paperweights values the marble it has on hand at its expected selling price since this is its expected value to the business. The marble's expected selling price exceeds the price Dennis paid for it.
___J__ 3. Torrey Company reports its inventory at cost when current replacement cost is significantly below cost.
___C__ 4. Holton's Novelties has 100,000 whistling dolls in inventory at a cost of $5 each. Only eight were sold last month. Not wanting to write off this inventory and report a loss, Holton has decided not to issue financial statements until at least half of the dolls have been sold.
___D__ 5. Cooper's Pizza is being liquidated because it has sustained losses for many years. It continues to depreciate its assets and prepare financial statements on the cost basis.

___K__ 7. Golden Industries has developed an automobile engine that will run on sea water instead of gasoline, while providing equal performance. They have chosen not to release reports of this engine to the public.
___F__ 8. Ron Martin made no entry to record depreciation on its equipment for 2005.
___G__ 9. Simon Brokerage bought each of its 5,000 employees new staplers for their desks. Each stapler cost $10 and was decorated with the company's logo. Since Simon expenses all assets costing less than $25, no asset was recorded.
__H___ 10. Baxter Lumber Company lost all of its standing timber due to a major forest fire in January of 2006. The trees were not insured. No mention was made of this loss in Baxter's 2005 financial statements, since the trees were still growing on December 31, 2005.

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