Five years ago, Linda Monroe became the sole owner of LM Electronics. LM Electronics sells home entertainment centers, 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 Friday morning, September 12, 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 out to her car.

Later that same day, Linda’s friend Chris Tucker came into the store, also wanting to purchase a CD player. After browsing through the store, Chris started to leave. Linda stopped him and asked, “Chris, didn’t you find a CD player that you would like to own?”

Chris responded: “Well, Linda, | saw several items | would love to own, but | hadn’t realized how expensive the equipment was. | guess | 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 that day at LM Electronics. After the store closed, Linda began thinking about Chris’s comment. Early that evening Linda telephoned Chris and said: “Chris, | know you were wanting a new CD player, but if you are interested in saving a bunch of money, |

would like to sell you the CD player | use at home. It is about two years old, and it is in great shape. | would sell it to you for $100.”

Chris was very excited about Linda’s offer. He drove over to Linda’s house that same night, gave Linda $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,

(1) indicate whether you agree or disagree with the following statements, and (2) explain each answer (this is the most important part, so think through the following statements carefully).

(a) Linda Monroe sold two CD players on September 12.

(b) LM Electronics sold two CD players on September 12.

(c) LM Electronics should record CD player sales of $700 on September 12.

(d) Linda Monroe should deposit $700 in the bank on September 12.  lo7