2.

Instructions: Each of the situations below may illustrate a violation of an accounting assumption or principle. Indicate the assumption or principle that is most clearly violated using the following codes:

Codes

A. Economic entity assumption	G. Materiality
B. Monetary unit assumption	H. Full disclosure principle
C. Time period assumption	I. Cost principle
D. Going concern assumption	J. Conservatism
E. Revenue recognition principle	K. No violation of operating guidelines
F. Matching principle

Situations

____ 1.	Stockholders invested an additional $60,000 cash in the business in 2007. This investment was reported as revenue on the 2007 income statement.
____ 2.	Larson 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 Larson paid for it.
____ 3.	Pandle Company reports its inventory at cost when current replacement cost is significantly below cost.
____ 4.	Kailey'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, Kailey has decided not to issue financial statements until at least half of the dolls have been sold.
____ 5.	Zenger'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.
____ 6.	Kim Penkins, president of Penkins Machinery, took a power saw out of inventory to use as a birthday present for his son. Supplies expense was debited.
____ 7.	Blake 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.	Minton Company made no entry to record depreciation on its equipment for 2007.
____ 9.	Stevens 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 Stevens expenses all assets costing less than $25, no asset was recorded. Using the following codes, classify each of the items listed below as either an assumption, a principle, or a constraint.

please explain