Martindale Ltd uses the historical cost system. While reviewing the business activities of the company, you discover that the following transactions and events were recorded. Ignore GST.

1. Ending inventory for the current year had a cost of \($230\) 400 and a selling price of \($204\) 000. The inventory was valued at cost because the company’s accountant believed that ‘the selling price will probably increase again during the next year’.

2. On 28 December of the current year, Martindale Ltd signed a contract with a customer under which Martindale Ltd agreed to manufacture equipment for the customer during January of the following year at a price of \($78\) 000. Martindale Ltd received a cheque for \($15\) 000 from the customer on 28 December and made the following entry.

Required

(a) For each of items (1) to (5), determine which accounting concept(s) (if any) is violated, and explain why. For each violation, indicate the correct treatment.

Transcribed Image Text:

Accounts Receivable Cash at Bank Sales 63 000 15 000 78 000