AD&J $1-68$ Identifying Violations of Elements, Principles, Assumptions L$04,5,6$

Challenge Problem An inspection of the annual financial statements and the accounting records revealed that Massey Hardware had violated accounting assumptions, accounting principles, and constraints. The following transactions were involved.

Merchandise purchased for resale was delivered on June $5.$ The invoice price was $$50,000$ with terms $\frac{n}{30}.$ The following month on July $1,$ the account was paid $($cash was credited for $$50,000)$ and an entry was recorded to increase inventory for $$50,000$ and to decrease cash for $$50,000.$

Accounts receivable of $$95,000$ was reported on the balance sheet on June $30$ for a sale shipped the following month.

In June, usual and ordinary repairs on operational assets were recorded as an increase to operational assets.

Treasury stock $($stock of the company that was sold and subsequently bought back from stockholders$)$ was debited to treasury stock $($asset account$)$ and was reported on the balance sheet as an asset at the purchase cost, $$76,000.$

Depreciation expense of $$227,000$ was recorded as a deduction directly from retained earnings on the balance sheet.

Income tax expense of $$18,000$ was recorded as a deduction directly from retained earnings on the balance sheet.

The company issued stock for land on June $30.$ The stock had a par value of $$1,000,$ but the fair value was not easily determinable. The fair value of the land was estimated to be $$3,000.$ The company recorded the entry as an increase to land for $$1,000$ and an increase to common stock for $$1,000.$

Required

For each transaction, identify the inappropriate treatment and what element, assumption, and$/$or principle was violated.