Options:

Correctness: Correct or Incorrect

Principle:

a. Faithfull representation

b. Faithful representation (Full disclosure) Materiality

c. Faithful representation (Net asset principle)

d. Historical Cost Measurement

e. Historical cost measurement and Net asset principle, Full disclosure materiality and separate-entity

f. Matching; Comparability

g. Matching; Time-period assumption

h. Revenue and Historical cost measurement

i. Revenue and matching; Faithful representation and Freedom from bias

j. Revenue recognition

k. Separate-entity

l. Time-period assumption

The following list of statements poses conceptual issues: Required: 1 and 2. Indicate whether each statement is correct or incorrect and identify the principle(s) posited. Correctness Principle a. Issue The business entity is considered separate and apart from its owners for accounting purposes. b. A transaction is always recorded in such a way as to reflect its legal form. It is permissible for a company to use straight-line depreciation, even though the rest of c. the industry uses declining-balance, because the company believes straight-line better reflects the pattern of benefits received from these assets. d. All details of transactions must be disclosed in the notes to the financial statements. e. The lower-of-cost-and-net realizable value method must be used in valuing inventories. f. The cost principle relates only to the income statement. g. Revenue should be recognized only when cash is received. h. Accruals and deferrals are necessary because of the separate-entity assumption. i. Revenue should be recognized as late as possible and expenses as early as possible