Q1: Read the statements below and indicate whether each statement is true [T] or false [F].

1. The periodicity assumption states that the business will remain in operation for the foreseeable future [].

2. If a building is offered for sale at $100,000 and the buyer pays $95,000 cash for it, the buyer would record the building at $100,000 [].

3. The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records [].

Q2: Choose the correct answer for the following:

1.Combining the activities of a firm and its owner would violate the:

a. Cost principle.

b. Economic entity assumption.

c. Monetary unit assumption.

d. Ethical principle.

2.Sami company purchased a land in 2007 for $290,000. In 2017, it purchased a nearly identical land for $460,000. In its 2017 balance sheet, the company valued these two lands at a combined value of $920,000. By reporting the lands in this manner, Sami company has violated the:

a. Full disclosure principle

b. Economic entity assumption

c. Monetary unit assumption

d. Historical cost principle

3.A very large corporation's financial statements have the dollar amounts rounded to the nearest $1,000. Which accounting guideline justifies not reporting the amounts to the penny?

a. Full disclosure principle

b. Monetary unit assumption

c. Materiality constraint

d. Revenue recognition principle

4. A company sold merchandise of $8,000 to a customer in December 2019. The company's sales terms require the customer to pay the company in 30 days. The company CFO decided to report this sale in the income statement in December 2019. Which accounting concepts was guiding the CFO decision?

a. Full disclosure principle

b. Revenue recognition principle

c. Matching principle

d. Cost/benefit constraint

5. A firm has an inventory with a cost of $15,000. However, the marketplace has changed dramatically and now the inventory can be sold for only $13,000. The accounting manager in the firm decided to write down the value of the inventory and report it at $13,000 with recognizing $2000 as losses in the net income statement. Which accounting concepts was guiding the accounting manager decision?

a. Historical cost principle

b. Economic entity assumption

c. Conservatism principle

d. Monetary unit assumption

Q3. Classify each item as an asset, liability, common stock, revenue, or expense.

Annual cost of renting a building.

Truck purchased.

Notes payable.

Issuance of ownership shares.

Amount earned from providing service.

Amounts owed to suppliers.