Accounting Principles and Assumptions
The following basic accounting principles and assumptions were discussed in the chapter:
Economic entity Monetary unit Cost principle Going concern Time period
Fill in each of the blanks with the accounting principle or assumption that is relevant to the situation described.
1. Genesis Corporation is now in its 30th year of business. The founder of the company is planning to retire at the end of the year and turn the business over to his daughter.
2. Nordic Company purchased a 20-acre parcel of property on which to build a new factory. The company recorded the property on the records at the amount of cash given to acquire it.
3. Jim Bailey enters into an agreement to operate a new law firm in partnership with a friend. Each partner will make an initial cash investment of $10,000. Jim opens a checking account in the name of the partnership and transfers $10,000 from his personal account into the new account.
4. Multinational Corp. has a division in Japan. Prior to preparing the financial statements for the company and all of its foreign divisions, Multinational translates the financial statements of its Japanese division from yen to U.S. dollars.
5. Camden Company has always prepared financial statements annually, with a year-end of June 30. Because the company is going to sell its stock to the public for the first time, quarterly financial reports will also be required by the SEC.