Answer:
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
- ECONOMIC ENTITY PRINCIPLE: the activities of a business must be kept separate form the activities of its owners
2. Apple Inc. distributes an annual report to its shareholders
- TIME PERIOD PRINCIPLE: companies must report their financial statements over standard or fixed periods of time, e.g. monthly, quarterly or annually
3. Hewlett-Packard Corporation depreciates machinery and equipment over their useful lives
- EXPENSE RECOGNITION: expenses must be recorded during the time periods that they actually occur
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
- HISTORICAL COST PRINCIPLE: assets must be recorded at purchase cost and the only adjustment can be accumulated depreciation
5. delivered to customers, even though the cash has not yet been
- THIS PART IS INCOMPLETE, BUT I BELIEVE IT REFERS TO THE REVENUE RECOGNITION PRINCIPLE: revenue must be recognized once the earning process has been completed and not necessarily when the cash is received.
6. Liquidation values are not normally reported in financial statements of $200,000 Honeywell International Inc. records revenue when products are received even though many companies do go out of business
- GOING CONCERN PRINCIPLE: this principle assumes that the business will continue to operate in the foreseeable future
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
- MATERIALITY: a company must record all the transactions that may affect the decision making processes. In this case, a tool will not make any difference on a multibillion dollar company.
