AAP. (SO 2, 4) CE1-7 Stanley Company, a proprietorship owned by Dave Stanley, had the following selected business transactions during the year: 1. Land with a cost of $208,000 was reported at its fair value of $260,000. 2. A lease agreement to rent equipment from an equipment supplier starting next year was signed. The rent is $500 per month and the lease is for two years. Payments are due at the start of each month. Nothing was recorded in Stanley Company's accounting records when the lease was signed. 3. Stanley paid the rent for an apartment for Dave's personal use and charged it to Rent Expense. 4. Stanley wanted to make its profit look worse than it really was, so it adjusted its expenses upward to include the effects of inflation. 5. Stanley included a note in its financial statements stating the company is a going concern and is following ASPE Instructions (a) In each situation, identify whether the accounting treatment is correct or not, and why. (b) If it is incorrect, state what should have been done. events to be 1. (SO 4) C E1-8 The following is a list of independent events: 1. A company pays $10,000 cash to purchase equipment at a bankruptcy sale. The equipment's fair value is $15,000. 2. A Canadian company purchases equipment from a company in the United States and pays US $5,000 cash. When the Canadian company went to its bank to buy a bank draft for US $5,000 to pay for the equipment, it cost them $5,200 Canadian. 3. A company provides $4,000 of services to a new customer on account. 4. A company hires a new chief executive officer, who will bring significant economic benefit to the company. The company agrees to pay the new executive officer $500,000 per year. 5. A company signs a contract to provide $10,000 of services to a customer. The customer pays the company $4,000 cash at the time the contract is signed. Instructions (a) Should the transaction be recorded in the accounting records? Explain why or why not. (b) If the transaction should be recorded, indicate the amount. Explain