Presented below are a number of operational guidelines and practices that have developed over time. Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices. (a) Fair value changes are not recognized in the accounting records. (b) Financial information is presented so that investors will not be misled. (c) Intangible assets are capitalized and amortized over periods benefited. (d) Repair tools are expensed when purchased. (e) Agricultural companies use fair value for purposes of valuing crops. (f) Each enterprise is kept as a unit distinct from its owner or owners. (g) All significant postbalance sheet events are reported. (h) Revenue is recorded at point of sale. (i) All important aspects of bond indentures are presented in financial statements.

Exercise 2-7
 
 
     Your answer is correct.
Presented below are a number of operational guidelines and practices that have developed over time.

Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices.
(a)        Fair value changes are not recognized in the accounting records.         
               
(b)        Financial information is presented so that investors will not be misled.         
               
(c)        Intangible assets are capitalized and amortized over periods benefited.         
               
(d)        Repair tools are expensed when purchased.         
               
(e)        Agricultural companies use fair value for purposes of valuing crops.         
               
(f)        Each enterprise is kept as a unit distinct from its owner or owners.         
               
(g)        All significant postbalance sheet events are reported.         
               
(h)        Revenue is recorded at point of sale.         
               
(i)        All important aspects of bond indentures are presented in financial statements.         
               
(j)        Rationale for accrual accounting.         
               
(k)        The use of consolidated statements is justified.         
               
(l)        Reporting must be done at defined time intervals.         
               
(m)        An allowance for doubtful accounts is established.         
               
(n)        Goodwill is recorded only at time of purchase.         
               
(o)        A company charges its sales commission costs to expense.         

                                        


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