A number of unrelated transactions recorded by Abba Company are as follows:
| 1. | At year end the Depreciation expense is calculated as $10,000, which results in a net book value |
that is $14,000 greater than the equipment's liquidation value:
| Loss on fair value adjustment | 14,000 |
| Depreciation Expense | 10,000 |
| Accumulated Depreciation | 24,000 |
| 2. | The proprietor of Abba paid for her household cleaning costs out of the business bank account: |
| 3. | A customer pays for November services in October. The October entry is: |
| 4. | Abba guaranteed the loan of a related party, Provincial Corp., and Provincial defaulted on its |
loan. In December, the bank demanded payment of $100,000 from Abba, who negotiated to make the payments in 4 equal monthly instalments, the first of which was made in December. The following entry was recorded by Abba when the December payment was made. No further information was provided in its financial statements because it is probable that Provincial will be able to make the remainder of the payments.
| Loss on Loan Guarantee | 25,000 |
Instructions For each of the above situations, identify the accounting assumption, concept, constraint, or recognition criteria that have been violated. Prepare the correct journal entry as it should have been made. If no entry should have been made, or if additional financial statement disclosure is required, explain.
