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The transaction treats Ben Manion and etheridge co. As one entity when they are two separate entities. The pencil sharpener could be depreciated to match the expense with revenue. The inventory was written up to its market value when it should have remained at cost.
The transaction treats Ben Manion and etheridge co. As one entity when they are two separate entities. The pencil sharpener could be depreciated to match the expense with revenue. The inventory was written up to its market value when it should have remained at cost.
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The transaction treats Ben Manion and etheridge co. As one entity when they are two separate entities. The pencil sharpener could be depreciated to match the expense with revenue. The inventory was written up to its market value when it should have remained at cost.
Hak Cipta:
Attribution Non-Commercial (BY-NC)
Format Tersedia
Unduh sebagai DOC, PDF, TXT atau baca online dari Scribd
EXERCISE 12-1
Time period assumption.
Cost principle.
Economic entity assumption.
Revenue recognition principle.
Full disclosure principle.
Matching principle.
Going concern assumption.
Noopons
EXERCISE 12-2
1. No violation of generally accepted accounting principles.
2. This is a violation of the economic entity assumption. The
transaction treats Ben Manion and Etheridge Co. as one
entity when they are two separate entities. No journal
entry should have been made since Ben Manion should
have used personal assets to purchase the truck. If cash
assets of the company were used, the debit entry could
be to Accounts Receivable—B. Manion, or the debit entry
could be to B. Manion, Drawing.
3. This is a question of matching and materiality. The pencil
sharpener could be depreciated to match the expense
with revenue since the pencil sharpener has an estimated
useful life of 5 years. However, the pencil sharpener
should not be depreciated because the cost of it is not
material. Since the cost of the sharpener is not material, it
should be expensed immediately. The correct journal
entry at the time of purchase is:
Miscellaneous Expense..
25
Cash...
254. This is a violation of the cost principle because the
equipment was recorded at its estimated market value
and not its exchange value. The correct journal entry is:
PROBLEM 12-3B
Costs Total Percent
Incurred Estimated Complete
Year _(CurrentPeriod) + Cost = _(Current Period)
2004 $ 3,000,000 $20,000,000 15%
2005 9,000,000 $20,000,000 45%
2006 5,000,000 $20,000,000 25%
2007 3,000,000 $20,000,000 15%
Totals $20,000,000
Percent Revenue
Complete Total Recognized
‘Current Period) X_ Revenue = (Current Period,
15% $28,000,000 $ 4,200,000
45% 28,000,000 12,600,000
25% 28,000,000 7,000,000
15% 28,000,000 4,200,000
$28,000,000
EXERCISE 12-2 (Continued)
65,000
5. This is a violation of the cost principle. The inventory was
written up to its market value when it should have
remained at cost. Thus, no journal entry should have
been made.