Five years ago, Linda Monroe became the sole owner of LM Electronics. LM Electronics sells home entertainment centres, car audio equipment and computers. LM advertises that it sells only the best brands, purchasing its inventory from well-known manufacturers in Japan, Germany, Norway and the United States. Before opening this company, Linda was the accountant for The Music Warehouse. She understands accounting extremely well, and maintains LM Electronics' accounting records according to generally accepted accounting principles.

On the morning of Friday 12 September, one of Linda's best customers, Sandy Wheeler, purchased a German-made CD player for \(\$ 600\). Linda was excited about making the sale because LM had only recently started carrying this particular brand. Linda filled out the sales invoice, collected the money and helped Sandy carry the CD player to her car.

Later that day, Linda's friend Chris Rucker came into the shop, also wanting to purchase a CD player. After browsing for a while, Chris went to leave the shop. Linda stopped him and asked, 'Chris, didn't you find a CD player that you'd like to own?' Chris replied, 'Well, Linda, I saw several items I'd love to own, but I hadn't realised how expensive the equipment was. I guess I really can't afford to buy a new CD player.'

Except for the deposit of the day's cash sales in the bank, no other activity took place at LM Electronics that day. After the shop closed, Linda began thinking about Chris' comment. Early that evening, she telephoned Chris and said, 'Chris, I know you were wanting a new CD player, but if you're interested in saving money, I'd like to sell you the CD player I use at home. It's about two years old and in great shape. I would sell it to you for \(\$ 100\).'

Chris was excited about Linda's offer. He drove over to her house that night, gave her \(\$ 100\) in cash and took the CD player home. Linda immediately deposited the \(\$ 100\) in the bank night depository.

Required:

Given the facts presented above and the information you learned in the chapter,

(a) indicate whether you agree or disagree with the following statements, and

(b) explain each answer (this is the most important part, so think through the following statements carefully).

i Linda Monroe sold two CD players on 12 September.

ii LM Electronics sold two CD players on 12 September.

LM Electronics should record CD player sales of \(\$ 700\) on 12 September.
iv L Linda Monroe should deposit \(\$ 700\) in the bank on 12 September.