Answer
a.This accounting principle is not apt. In line with the revenue recognition principle, the reverse depreciation expense should be credited to the net income account.
b.This accounting treatment is not fitting. In line with the full disclosure principle, the values of the opening and final inventories ought to be incorporated in the journal entries as well so the user can understand how the \$21,000 came about.
c.For this treatment, the fair value principle ought to have been used. Accordingly, the amount that should have been included in the journal entries is \$450,000 because it is more relevant than the par value.
d.In line with the periodicity principle, the gains should not be deferred. The gains should not be amortized to unrelated periods; they should be assigned to their actual respective periods.
e.The revenue recognition principle would necessitate that the sales revenue is recognized once the customer has gotten the order (after completing Cramer, Inc.'s obligation), not when the order was shipped. This accounting entry is erroneous since it was made before the accomplishment of the performance obligation.
Work Step by Step
N/A
