Problem $1$

Fill in the blanks below with the accounting principle that best applies.

a$.$ Cost

b$.$

e$.$ Objective Evidence

f$.$ Full Disclosure

g$.$

c$.$ Going Concern

k$.$ Realization

Business Entity d$.$ Unit of Measurement

h$.$ Matching

i$.$ Conservatism

Consistency j$.$ Materiality

A lodging company pays a fire insurance premium of $$40,000.$ The policy covers a t wo$-$year period. The $$40,000$ cash disbursement is recorded as insurance expense. This violates the principle.

$2.$A guestroom wastebasket costing $$20$ is expensed when it is purchased. The wast ebasket should have a five$-$year life. This is probably acceptable accounting becaus e of the principle.

$3.$The food inventory is generally valued at its cost at the end of each year. However, this year it is written down at its market value because the market value is less than cost. The valuing of food inventory at the lower of cost or market is according to th e principle.

$4.$A$.$ Dogg, the proprietor of Dogg's Dining, takes a few steaks home from his busine ss$.$ He records the cost of the steaks taken for personal use as $"$A$.$ Dogg, Drawing" $in$ accordance with the principle.

$5.$The Yorkshire Hotel, in addition to including its depreciation expense on the incom e statement, mentions its method of depreciation and the estimated lives of its pro perty and equipment in a footnote. This is based on the principle.

$6.$A hotel purchases a van for $$5,000$ from a distressed rental agency. Due to the principle, it is recorded at $$5,000,$ even though the hotel could resell it for $$6,500.$

A motel receives an advance deposit of $$150$ for reserving guestrooms and meetin g room space. This transaction cannot be classified as a sale because of the rinciple.

$8.$A resort hotel has used the straight$-$line method to depreciate its recreation equip ment. This year it decides to use another type of depreciation method on these sa me assets. This violates the principle.