Exercise 2-07 The following are operational guidelines and practices that have developed over time for financial reporting. Select the foundational principle that best justifies each of these procedures and practices. 1. Price-level changes (inflation and deflation) are not recognized in the accounting records. 2. Sufficient financial information is presented so that reasonably prudent investors will not be misled. 3. Property, plant, and equipment are capitalized and depreciated over the periods that they benefit. 4. There is no intent to liquidate the company's operations or activities. 5. Market value is used by companies for the valuation of certain securities that are regularly bought and sold. Revenue recognition and realization Economic entity and control Periodicity Historical cost and matching Matching Historical cost Matching/Fair value Full disclosure Monetary unit Fair value Going concern 6. After initial acquisition, the entity values land at its original transaction price. 7. All significant post-balance sheet events are reported. 8. Revenue is recorded at the point of sale. 9. All important aspects of bond indentures are presented in financial statements. 10. The rationale for accrual accounting is stated. 11. The use of consolidated statements is justified. 12. Reporting must be done at defined time intervals. 13. An allowance for doubtful accounts is established. 14. Goodwill is recorded only at the time of a business combination and does not change unless the goodwill becomes impaired. 15. Sales commission costs are charged to expense in the period of the sale