Listed below are several statements that relate to financial accounting and reporting. Identify the basic assumption, broad accounting principle, or constraint that applies to each statement.
1. Jim Marley is the sole owner of Marley’s Appliances. Jim borrowed $100,000 to buy a new home to be used as his personal residence. This liability was not recorded in the records of Marley’s Appliances.
2. Apple Computer, Inc., distributes and annual report to its shareholders.
3. Hewlett-Packard Corporation depreciates machinery and equipment over their useful lives.
4. Crosby Company lists land on its balance sheet at $120,000, its original purchase price, even though the land has a current fair value of $200,000.
5. Honeywell Corporation records revenue when products are delivered to customers, even though the cash has not yet been received.
6. Liquidation values are not normally reported in financial statements even though many companies do go out of business.
7. IBM Corporation, a multibillion dollar company, purchased some small tools at a cost of $800. Even though the tools will be used for a number of years, the company recorded the purchase as an expense.