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P 1-2

Certain underlying considerations have had an important impact on the development of generally accepted accounting principles. Following is a list of these underlying considerations, as well as a list of statements describing them
a. Going concern or continuity b. Monetary unit c. Conservatism d. Matching e. Full disclosure
f. Materiality g. Transaction approach h. Accrual basis i. Industry practices j. Verifiability
k. Consistency l. Realization m. Historical cost n. Time period o. Business entity
O 1. The business for which the financial statements are prepared is separate and distinct from the owners.
N 2. The assumption is made that the entity will remain in business for an indefinite period of time.
B 3. Accountants need some standard of measure to bring financial transactions together in a meaninngful way
L 4. Revenue should be recognized when the earning process is virtually complete and the exchange value can be objectively determined.
D 5. This concept deals with when to recognize the costs that are associated with the recognized revenue.
E 6. Accounting reports must disclose all facts that may influence the judgment of an informed reader.
F 7. This concept involves the relative size and importance of an item to a firm.
J 8. The accountant is required to adhere as closely as possible to verifiable data.
I 9. Some companies use accounting reports that do not conform to the general theory that underlies accounting.
G 10. The accountant records only events that affect the financial position of the entity and, at the same time, can be reasonably determined in monetary terms.
H 11. Revenue must be recognized when it is realized (realization concept), and expenses are recognized when incurred (matching concept).
K 12. The entity must give the same treatment to comparable transactions from period to period.
C 13. The measurement with the least favorable effect on net income and financial position in the current period must be selected.
M 14. Of the various values that could be used, this value has been selected because it is objective and determinable.
A 15. With this assumption, inaccuracies of accounting for the entity short of its complete life span are accepted.

Chapter 2 To The Net Case

1. Go to the COSO Web site: www.coso.org. What is COSO? List the five major professional associations that sponsored COSO.
COSO - Committee Of Sponsoring Organizations of the Treadway Commission
American Accounting Association
American Institute of CPA's
Financial Executives International
The Association of Accountants and Financial Professionals in Business
The Institute of Internal Auditors
2. Consolidated Statement Presentation - Go to the SEC Web site: www.sec.gov. Under “Filings & Forms (EDGAR),” click on “Search for Company Filings.” Click on “Company or fund name.”
a. Under Company Name, enter “Ford Motor Co” (or under Ticker Symbol, enter “F”). Select the 2010 10-K. Review the Sector Statement of Income found a little over half-way through the document. Describe in some detail the consolidation presentation. (Refer to comments in this chapter.)
b. Type in “Dow Chemical Co” (or under Ticker Symbol, enter “DOW”). Select the 2010 10-K. Review the consolidated statements of income. Describe in some detail the consolidated presentation. (Refer to comments in this chapter.)
3. Proxy - Go to the SEC Web site: www.sec.gov. Under “Filings & Forms (EDGAR),” click on “Search for Company Filings.” Click on “Company or Fund Name Etc.” Under Company Name, enter “Gorman-Rupp Company” (or under Ticker Symbol, enter “GRC”). Select the 2010 proxy. Go to Executive Compensation within the proxy. Describe the executive compensation.
4. Audit Report and Auditor’s Report on the Firm’s Internal Controls - Go to the SEC Web site: www.sec.gov. Under “Filings & Forms (EDGAR),” click on “Search for Company Filings.” Click on “Company or Fund Name Etc.” Under Company Name, enter “Bemis Company” (or under Ticker Symbol, enter “BMS”). Select the 2010 10-K. Go to Report of Independent Registered Public Accounting Firm. Compare this report with Exhibit 2-5 (Audit Opinion) and Exhibit 2-6 (Auditor’s Report on the Firm’s Internal Controls). What is the basic difference in presentation?
5. Go to the SEC site (www.sec.gov). Under “Filings & Forms (Edgar),” click on “Search for Company Filings.” Click on “Company or fund, etc.” Under Company Name, enter “Honeywell International Inc.” (or under Ticker Symbol, enter “HON”). Select the 10-K filed February 11, 2011.
a. “Item 8 Financial Statements and Supplementary Data”,
1. What is the cash and cash equivalents balance at December 31, 2009?
b. Go to “Consolidated Statement of Cash Flows”
1. What is the cash and cash equivalents at the beginning of the year ended December 31, 2010?
2. What is the cash and cash equivalents at the end of the year ended December 31, 2010?
c. Go to “Consolidated Balance Sheet” December 31, 2010
1. What is the cash and cash equivalents at December 31, 2010?
d. From the “Consolidated Balance Sheet”:
1. What is the retained earnings at December 31, 2009?
e. Go to “Consolidated Statement of Operations”
1. What is the net income attributable to Honeywell for year ended December 31, 2009?
f. Go to “Consolidated Statement of Shareowners Equity”
1. What is the beginning balance of retained earnings for year ended December 31, 2010?
2. What was the net income attributable to Honeywell for the year ended December 31, 2010?
3. What was the dividends paid on common stock for the year ended December 31, 2010?
4. What is the ending balance of retained earnings for December 31, 2010?
g. Go to “Consolidated Balance Sheet” for December 31, 2010
1. What is the balance for retained earnings at December 31, 2010?
h. Go to the “Consolidated Statement of Cash Flows”
1. What was the cash dividend paid for 2010?
i. What was the dividends paid on common stock for the year ended December 31, 2010 (Consolidated Statement of Shareowners Equity)?
j. What was the cash dividend paid for 2010 (Consolidated Statement of Cash Flows)? Try to explain the difference between these numbers.
6. Go to www.businessethics.ca. Click on “Business Ethics Articles.” Click on “Short Articles on Workplace Ethics” by Cornelius von Baeyer. Select an article and write a summary.