A number of unrelated transactions recorded by Provincial Company are as follows:
1. At the end of the month, the obsolete inventory was valued at $17,000. No entry was made.
2. Provincial, which owns an art gallery, purchases a valuable painting for $40,000 in November, and sells it in January, which is after the company's year end. The entry made when the painting is purchased is:
3. Equipment was purchased for $8,000 from a store that is going out of business. The equipment was appraised at $10,000. Instructions
For each of the above situations, identify the accounting assumption, concept, constraint or recognition criteria that have been violated. Prepare the correct journal entry as it should have been made. If no entry should have been made, or if additional financial statement disclosure is required, explain.

Question

A number of unrelated transactions recorded by Provincial Company are as follows:
1. At the end of the month, the obsolete inventory was valued at $17,000. No entry was made.
2. Provincial, which owns an art gallery, purchases a valuable painting for $40,000 in November, and sells it in January, which is after the company's year end. The entry made when the painting is purchased is:  
3. Equipment was purchased for $8,000 from a store that is going out of business. The equipment was appraised at $10,000.  Instructions
For each of the above situations, identify the accounting assumption, concept, constraint or recognition criteria that have been violated. Prepare the correct journal entry as it should have been made. If no entry should have been made, or if additional financial statement disclosure is required, explain.

Quizplus · Accepted Answer

The Answer of A number of unrelated transactions recorded by Provincial Company are as follows:
1. At the end of the month, the obsolete inventory was valued at $17,000. No entry was made.
2. Provincial, which owns an art gallery, purchases a valuable painting for $40,000 in November, and sells it in January, which is after the company's year end. The entry made when the painting is purchased is:  
3. Equipment was purchased for $8,000 from a store that is going out of business. The equipment was appraised at $10,000.  Instructions
For each of the above situations, identify the accounting assumption, concept, constraint or recognition criteria that have been violated. Prepare the correct journal entry as it should have been made. If no entry should have been made, or if additional financial statement disclosure is required, explain.

A Number of Unrelated Transactions Recorded by Provincial Company Are