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For each of the given practices, indicate which accounting concepts, principles, or constraints apply and whether they have been applied appropriately. For each inappropriate accounting practice, indicate the proper accounting procedure.

The following are unrelated accounting practices:

1. Pine Company purchased a new $30 snow shovel that is expected to last six years. The shovel is used to clear the firms front steps during the winter months. The shovels cost is recorded on the companys balance sheet as an asset.

a. Accounting entity concept

b. Cost principle

c. Cost-benefit constraint

d. Full disclosure principle

e. Going concern concept

f. Materiality

g. Monetary unit concept

h. Revenue recognition principle

2. Penny Corporation has been named as the defendant in a $50 million pollution lawsuit. Because the lawsuit will take several years to resolve and the outcome is uncertain, Pennys management decides not to mention the lawsuit in the current year financial statements.

a. Accounting entity concept

b. Cost principle

c. Cost-benefit constraint

d. Full disclosure principle

e. Going concern concept

f. Materiality

g. Monetary unit concept

h. Revenue recognition principle

3.A recession has caused a slowing of business activity and lower profits for Penn Company. Consequently, the firm delays making its payments for Decembers rent and utilities until January and does not record either of these expenses in December

a. Accounting entity concept

b. Cost principle

c. Cost-benefit constraint

d. Full disclosure principle

e. Going concern concept

f. Materiality

g. Monetary unit concept

h. Revenue recognition principle

4. Joan Jeffrey, a consultant operating as a sole proprietorship, used her business car for a personal, month-long vacation. A full years gas and oil expenditures on the car are charged to the firms gas and oil expense account.

a. Accounting entity concept

b. Cost principle

c. Cost-benefit constraint

d. Full disclosure principle

e. Going concern concept

f. Materiality

g. Monetary unit concept

h. Revenue recognition principle

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