The following are transactions recorded by Lock and Key Corporation during the current year. Ordinary operating maintenance on equipment was recorded as follows: Equipment: 2,500 Accounts Payable: 2,500 Lock and Key Corporation received an advance on a custom order for merchandise that will be shipped during the next accounting year. Cash: 8,000 Sales Revenue: 8,000 Lock and Key Corporation is holding inventory on consignment for Rubber Ltd. Lock and Key will only pay Rubber when a sale is made to a customer. Lock and Key made the following entry when it received the inventory: Inventory: 15,000 Accounts Payable: 15,000 On the last day of the accounting period, a 12-month insurance policy was purchased. The insurance coverage is for the next accounting year. Insurance Expense: 4,000 Cash: 4,000 Required: For each transaction 1) Determine which component of the conceptual framework (qualitative characteristic and/or principle) was violated, if any, and 2) Give the entry that should have been recorded if there was a violation

The following are transactions recorded by Lock and Key Corporation during the current year. Ordinary operating maintenance on equipment was recorded as follows: Equipment: 2,500 Accounts Payable: 2,500 Lock and Key Corporation received an advance on a custom order for merchandise that will be shipped during the next accounting year. Cash: 8,000 Sales Revenue: 8,000 Lock and Key Corporation is holding inventory on consignment for Rubber Ltd. Lock and Key will only pay Rubber when a sale is made to a customer. Lock and Key made the following entry when it received the inventory: Inventory: 15,000 Accounts Payable: 15,000 On the last day of the accounting period, a 12-month insurance policy was purchased. The insurance coverage is for the next accounting year. Insurance Expense: 4,000 Cash: 4,000 Required: For each transaction 1) Determine which component of the conceptual framework (qualitative characteristic and/or principle) was violated, if any, and 2) Give the entry that should have been recorded if there was a violation

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 44P

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