A bookkeeping client of yours made the following journal entry to record the purchase of a piece of equipment to be used in the sales office. The useful life of the equipment is estimated at five years.

You have told the client that the journal entry is incorrect, but the client does not want to fix it, arguing that “an asset is an asset.” You have learned that the client is seeking a bank loan. Discuss what you should do in this situation.

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Supplies Accounts payable 8,000 8,000