Presented below are some business transactions that occurred during 2006 for Vicki Prowitz Company.

(a) Merchandise inventory with a cost of $208,000 is reported at its market value of

$260,000. The following entry was made.

(b) Equipment worth $62,000 was acquired at a cost of $41,000 from a company that had water damage in a flood. The following entry was made.

(c) The president of Vicki Prowitz Company, Mark Nabke, purchased a truck for personal use and charged it to his expense account. The following entry was made.

(d) An electric pencil sharpener costing $50 is being depreciated over 5 years. The following entry was made.

Instructions In each of the situations above, identify the assumption, principle, or constraint that has been violated, if any. Discuss the appropriateness of the journal entries, and give the correct journal entry, if necessary.

Transcribed Image Text:

Merchandise Inventory Gain 52,000 52,000