Danny Manning and Larry Brown are accountants for the Engineering Institute. They disagree over the following transactions that occurred during 2008. Larry disagrees with Danny on each of the transactions below.

1. The Engineering Institute finds a bargain for a commercial-grade plotter and pays \($3,000\). Danny argues that if they had bought it from the dealer, they would have paid \($4,000\). Danny suggests they record the plotter for $4,000.

2. Timothy West, president of the Engineering Institute, used his company expense account to purchase a new BMW for his personal use. Danny argues that since the president is also the owner of the Engineering Institute, it really does not matter who paid for it.

3. Depreciation for the year was \($114,000\). Danny argues that since net income is expected to be lower in the current fiscal year, they should just charge it as an expense next year.

4. Danny suggests that the Engineering Institute value its equipment on its balance sheet at its liquidation value, which is \($50,000\) less than cost.

5. The Engineering Institute signed a lease on its offices for the next five years. A lease liability is not included on the company’s balance sheet. Danny doesn’t think such information needs to be disclosed.

Required

For each of the above transactions, identify why Larry disagrees. Also identify the assumption, principle, or constraint that has been violated.