Reference no: EM132661576
Question - Presented below are some business transactions that occurred during 2019 for ABC Company.
Instructions - For each situation below, identify the assumption, concept or constraint that has been violated, if any and why. If the Journal Entry is incorrect, prepare the entry that should have been made. If no Journal Entry is required, state this.
1. A heavy duty stapler costing $25 is being depreciated over 5 years. The following entry was made:
Depreciation Expense-Stapler 5
Accumulated Depreciation-Stapler 5
2. The owner of Tonnee Company took a vacation to France and charged the travel expenses to the company. The following entry was made:
Travel Expense 4,000
Cash 4,000
3. An account receivable has been deemed a bad debt. The following entry was made:
Allowance for Doubtful Accounts 9,000
Accounts Receivable 9,000
4. Merchandise Inventory with a cost of $420,000 is reported at its fair value of $510,000. The following entry was made:
Merchandise Inventory 90,000
Gain on Fair Value Adjustment of Inventory 90,000
5. Equipment worth $75,000 was acquired at a cost of $60,000 from a company that was going out of business. The following entry was made:
Equipment 75,000
Cash 60,000
Gain from on Fair Value Adjustment on Equipment 15,000
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