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ACCT 3220
Fall 2013
Group Exercise #1
PART I
Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices. (Do not use qualitative characteristics.)
(a)
Fair value changes are not recognized in the accounting records.
(b)
Lower of cost or market is used to value inventories.
(c)
Financial information is presented so that investors will not be misled.
(d)
Intangible assets are capitalized and amortized over periods benefited.
(e)
Repair tools are expensed when purchased.
(f)
Agricultural companies use fair value for purposes of valuing crops.
(g)
Each enterprise is kept as a unit distinct from its owner or owners.
(h)
All significant post-balance sheet events are reported.
(i)
Revenue is recorded at point of sale.
(j)
All important aspects of bond liabilities are presented in financial statements.
(k)
Rationale for (example of) accrual accounting.
(l)
The use of consolidated statements is justified.
(m)
Reporting must be done at defined time intervals.
(n)
An allowance for doubtful accounts is established.
(o)
All payments out of petty cash are charged to Miscellaneous Expense. (Do not use conservatism.)
(p)
Goodwill is recorded only at time of purchase of substantially another company.
(q)
No profits are anticipated and all possible losses are recognized.
(r)
A company charges its sales commission costs to expense.
PART II
Green Fields Miniature Golf and Driving Range Inc. was opened on March 1 by Mickey Fields. The following selected events and transactions occurred during March.
Mar.
1
Invested $60,000 cash in the business in exchange for common stock.

3
Purchased Melissa Wie’s Golf Land for $38,000 cash. The price consists of land $10,000; building $22,000; and equipment $6,000. (Make one compound entry.)

5
Advertised the opening of the driving range and miniature golf course, paying advertising expenses of…