Answer
a. This entry infringes the economic entity principle by documenting personal expenses in the company's accounts.
b. This entry contravenes the matching principle. The expenses associated with the inventory should be corresponded with the revenue. Besides, the amount documented in the balance sheet should be the confirmed fair value.
c. This entry flouts the full disclosure principle. It includes liability amounts that are yet to be incurred, and that may not be incurred by the entity. Thus, it misinforms the users about the financial implications of the suit.
d. This entry is in line with the expense recognition principle because the understated amount of depreciation is charged as an expense to its appropriate period.
e. This entry complies with the matching principle, with the goodwill amount being appropriately debited in the retained earnings account and credited to the goodwill account.
f. This accounting entry does not uphold the measurement principle; it utilises both the fair value and historical values concurrently. The amount that should be debited in the equipment account is $155,000 because it is the historical cost that will constitute the base of depreciation.
Work Step by Step
N/A
