An examiners close inspection of the annual financial statements and the accounting recrds revealed that Mawani Inc may have violated some accounting principles. The excamiers questioned the following transactions:

a. Merchandise purchased for resale was recorded as a debit to inventory for the invoice price of $80,000 (accounts payable was credited for the same account); terms were 2/10, n/30. Ten days later, Mawani Inc paid thr account at the net amount, $78,400 ($80,000 less the 2% discount). The shown in inventory at $80,000 at year end.

b. For inventory valuation, Fluidity switched from FIFO to weighted- average cost and then back to FIFO for the same items during a five-year period.

c. Fluidity follows a policy of depreciating plant and equipment on the straight-line bases over a period of time that is 50% longer than the historic use of similar equipment.

d. In its annual financial statements, the company reports interest expense as the net amount of interest expense less interest revenue. The amounts are very small, relative to the scale of Fluiditys business activities.

Required:

1. Identify and briefly explain the accounting principle directly involved in each situation.

2. Indicate what, if anything, the company should do in the future by way of making any changes to the accounting policy.