Stanley Company, a proprietorship, had the following selected business transactions during the year:
1. Land with a cost of $208,000 was reported at its fair value of $260,000.
2. A lease agreement to rent equipment from an equipment supplier starting next year was signed. The rent is
$500 per month and the lease is for two years. Payments are due at the start of each month. Nothing was recorded in Stanley Company's accounting records when the lease was signed.
3. Stanley paid the rent for an apartment for the owner's personal use and charged it to Rent Expense.
4. Stanley wanted to make its profit look worse than it really was, so it adjusted its expenses upward to include the effects of inflation.
5. Stanley included a note in its financial statements stating the company is a going concern and is following ASPE.
Instructions
(a) In each situation, identify whether the accounting treatment is correct or not, and why.
(b) If it is incorrect, state what should have been done.