Test Your Skills 53 Test Your Skills 1. Match the accounting principle to the listed business...

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Test Your Skills 53 Test Your Skills 1. Match the accounting principle to the listed business activity that best illustrates the principle's use. Accounting Principle Conservatism Consistency Cost Distinct business entity Full disclosure Going concern Matching Materiality Monetary unit Objectivity Time period (a) (b) Business Activity A hotel purchases a new PMS and then, each month, expenses a portion of the system's cost over its useful life. The value of land purchased by a business owner is recorded on the business's balance sheet at the land's purchase price, rather than at the land's currently appraised value. A bar maintains its daily sales records in a POS system and then utilizes those records to prepare its monthly income statement. The expenses of a hotel's owners are kept completely separate from those of the hotel they own. (c) (d) (c) A seasonal resort indicates on its financial statements that its fiscal year runs from October 1 to September 30. (f) Each month a hotel records accrued payroll expense due and payable in the following month. (g) (h) (i) (j) (k) A restaurant expenses, in the month they were purchased, the full cost of measuring cups bought for use in its bakery rather than depreciating the cups' cost over their 10-year estimated useful life. A Canadian hotel company with international operations reports its annual financial results in Canadian dollars. A caterer records the food expense incurred this month for products purchased to be used in preparing a wedding banquet that will not be held until next month. A hotel's attorney predicts the hotel will lose in a personal injury suit brought against the hotel. As a result, the hotel reports the estimated judgment against it in footnotes to its financial statements. The expense of a dishwasher purchased by a restaurant for $10,000 is recorded at, and then depreciated for that exact amount despite the fact that the restaurant's equipment supplier paid only $8000 for the machine. Accounting Principle Test Your Skills 53 Test Your Skills 1. Match the accounting principle to the listed business activity that best illustrates the principle's use. Accounting Principle Conservatism Consistency Cost Distinct business entity Full disclosure Going concern Matching Materiality Monetary unit Objectivity Time period (a) (b) Business Activity A hotel purchases a new PMS and then, each month, expenses a portion of the system's cost over its useful life. The value of land purchased by a business owner is recorded on the business's balance sheet at the land's purchase price, rather than at the land's currently appraised value. A bar maintains its daily sales records in a POS system and then utilizes those records to prepare its monthly income statement. The expenses of a hotel's owners are kept completely separate from those of the hotel they own. (c) (d) (c) A seasonal resort indicates on its financial statements that its fiscal year runs from October 1 to September 30. (f) Each month a hotel records accrued payroll expense due and payable in the following month. (g) (h) (i) (j) (k) A restaurant expenses, in the month they were purchased, the full cost of measuring cups bought for use in its bakery rather than depreciating the cups' cost over their 10-year estimated useful life. A Canadian hotel company with international operations reports its annual financial results in Canadian dollars. A caterer records the food expense incurred this month for products purchased to be used in preparing a wedding banquet that will not be held until next month. A hotel's attorney predicts the hotel will lose in a personal injury suit brought against the hotel. As a result, the hotel reports the estimated judgment against it in footnotes to its financial statements. The expense of a dishwasher purchased by a restaurant for $10,000 is recorded at, and then depreciated for that exact amount despite the fact that the restaurant's equipment supplier paid only $8000 for the machine. Accounting Principle