Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 2 - Conceptual Framework for Financial Reporting - Exercises - Page 74: E2-9f

Answer

This entry violates the historical cost principle.

Work Step by Step

The fire equipment should have been recorded at the price the organization paid for it (155,000) and not what they would have paid if the offer was not available (200,000). Therefore, there was also no revenue to be recognized.
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