Applying Qualitative Characteristics, Principles, and Assumptions What qualitative characteristic, accounting principle, or assumption justifies the accounting treatment in each situation a through e? Hint: Each answer will only be used one time. a. Prepayment for an annual license is allocated equally to expense over the next 12 months for America Inc. b. Williams owns a shoe repair shop, a restaurant, and a service center. Separate financial statements are prepared for each business. c. Inventories at Kaylee Inc. are valued at lower of cost or net realizable value. (There are two answers to this question, one is the expense recognition principle, what is the other?) d. Although the Inflation rate for the most recent fiscal year of Maxim Auto was 6%, no adjustment was made on the year-end statements. Economic entity assumption Expense recognition principle Faithful representation Full disclosure principle e. While making a delivery, the driver for A-to-Z Store collided with another vehicle, causing both property damage and personal injury. The party sued A-to-Z for damages that could exceed A-to-Z's Insurance coverage. Existence of the sult was disclosed on A-to-Z's most recent financial statements. Monetary unit assumption x x x