E1.1 A number of accounting principles and concepts (such as the matching principle) were discussed in this chapter. For each of the following situations, state which principle or concept is involved.

a. A case of food poisoning occurred in a restaurant. The restaurant is being sued by a number of its customers who were hospitalized. The estimated cost that the restaurant is likely to suffer from this lawsuit is disclosed in a footnote because of the __________ principle.

b. A hotel has traditionally depreciated its furniture and equipment using the straight-line method. This year a different depreciation method was used without advising its financial statement readers of this change. As a result, it is violating both the __________ principle and the __________ principle.

c. A motel’s normal payday for employees is every Friday. The yearend occurs on a Monday. The pay earned by employees for those three days is recorded in the motel’s accounts because of the __________ principle.

d. Last year a remote fishing resort purchased a floatplane to fly guests to the resort. The aircraft cost at that time was $150,000. This year, the plane is worth $160,000. However, it continues to be recorded on the books at $150,000 because of the __________ principle and the __________ principle.