E Ass Wil NW Ch Lec Ch che 0 ch ww "EMfcg GIZGCFbmrbpRRril WalbspDv?projector=1&message Partid:0.1 zion to pe EC290 Textbook EC295 0281 BU225 Assignment 1 pers. Midterm 2 BU283, QUESTION ONE (16 marks) The following are transactions recorded by LMB Corporation during the current year. You are reviewing these transactions and plan to make any adjusting journal entries required before LMB's financial statements are finalized. LMB has a December 31" 2019 year end and it is a public company. REQUIRED: For each transaction, (a) list two components of the conceptual framework (i.e., qualitative characteristic, element, and/or foundational principle) that were violated, if any, and (b) provide the adjusting entry (if any) that should be recorded if there was a violation that requires correction. (Note: if you use representational faithfulness for part (), you must describe what part of representational faithfulness you are referring to). 1. A patent was purchased from EGB Corporation and it was recorded as follows: Patent Expenses $50,000 Cash 1 $50,000 Matching principle hom a Expense. Patent expense , 3 not Hot on expense as it does it PotentLindorone A$S2+) on 4sde 150 000 Cash x 60000 2. LMB received a payment from a customer on Dec. 15, 2019, for a project scheduled to begin, and to be delivered in the first quarter of 2020. LMB recorded the following: Cash $7,500 Sales Revenue $7,500 This expense will not Corresponding revenue revenue and is not directly cause revenue. on is instead Routnud Conco- all 2016.pdf doc 11) odl HR-QUIZ-T8-1.pdf Chapter 7 pdf MacBook Air 4 3. LMB has a consignment sales agreement with GEB and currently has goods that it manufactured at GEB's location of business waiting to be sold to the final customer. LMB made the following entry when it shipped the inventory to GEB in late December 2019: Accounts Receivable $7,000 Inventory $7,000 Full discosure we we do not linget what ton. agreement is on - Control - In sun Cose whord LMB Still Controls un asset ty Connot yet Credit inventory - when LMB /recognizes Remenuo no entry needed, but disclosure is. 4. A customer recently fell on LM's property and suelt LMB for $500,000. Legal counsel believes the lawsuit will be partially successful and estimates that there is a 50% chance that LMB will be required to pay $200,000, and a 50% chance that LMB will be required to pay $400,000. To be prudent, LMB recorded the following: Litigation Expense $400,000 Litigation Liability $400,000 full disclosure - we need to disclose why we Chose to vo Page 2/10 + 2016.pdf doc (1).pdf HR-QUIZ-TB-1 d.pdf 5 Chapter 7.pdf MacBook Air 80 F3 888 F4 00 77 DI DD 59 : % A & E Ass Wil NW Ch Lec Ch che 0 ch ww "EMfcg GIZGCFbmrbpRRril WalbspDv?projector=1&message Partid:0.1 zion to pe EC290 Textbook EC295 0281 BU225 Assignment 1 pers. Midterm 2 BU283, QUESTION ONE (16 marks) The following are transactions recorded by LMB Corporation during the current year. You are reviewing these transactions and plan to make any adjusting journal entries required before LMB's financial statements are finalized. LMB has a December 31" 2019 year end and it is a public company. REQUIRED: For each transaction, (a) list two components of the conceptual framework (i.e., qualitative characteristic, element, and/or foundational principle) that were violated, if any, and (b) provide the adjusting entry (if any) that should be recorded if there was a violation that requires correction. (Note: if you use representational faithfulness for part (), you must describe what part of representational faithfulness you are referring to). 1. A patent was purchased from EGB Corporation and it was recorded as follows: Patent Expenses $50,000 Cash 1 $50,000 Matching principle hom a Expense. Patent expense , 3 not Hot on expense as it does it PotentLindorone A$S2+) on 4sde 150 000 Cash x 60000 2. LMB received a payment from a customer on Dec. 15, 2019, for a project scheduled to begin, and to be delivered in the first quarter of 2020. LMB recorded the following: Cash $7,500 Sales Revenue $7,500 This expense will not Corresponding revenue revenue and is not directly cause revenue. on is instead Routnud Conco- all 2016.pdf doc 11) odl HR-QUIZ-T8-1.pdf Chapter 7 pdf MacBook Air 4 3. LMB has a consignment sales agreement with GEB and currently has goods that it manufactured at GEB's location of business waiting to be sold to the final customer. LMB made the following entry when it shipped the inventory to GEB in late December 2019: Accounts Receivable $7,000 Inventory $7,000 Full discosure we we do not linget what ton. agreement is on - Control - In sun Cose whord LMB Still Controls un asset ty Connot yet Credit inventory - when LMB /recognizes Remenuo no entry needed, but disclosure is. 4. A customer recently fell on LM's property and suelt LMB for $500,000. Legal counsel believes the lawsuit will be partially successful and estimates that there is a 50% chance that LMB will be required to pay $200,000, and a 50% chance that LMB will be required to pay $400,000. To be prudent, LMB recorded the following: Litigation Expense $400,000 Litigation Liability $400,000 full disclosure - we need to disclose why we Chose to vo Page 2/10 + 2016.pdf doc (1).pdf HR-QUIZ-TB-1 d.pdf 5 Chapter 7.pdf MacBook Air 80 F3 888 F4 00 77 DI DD 59 : % A &