nancial accounting problem 7-1A Question Details Scott and Quick are accountants for Millenium Computers. They disagree over the following transactions that occurred during the calendar year 2008. For each transaction, indicate why Quick disagrees. Identify the accounting principle or assumption that Scott would be violating if his suggestions were used. Prepare the correct journal entry for each transaction, if any. (If there is no transaction, enter No entry as the description and 0 for the amount.) 1. Scott suggests that equipment should be reported on the balance sheet at its liquidation value, which is $15,000 less than its cost. Violation: Time period assumptionFull disclosure principleRevenue recognition principleEconomic entity assumptionMatching principleNo violationMonetary Unit assumptionGoing Concern AssumptionMaterialityConservatismCost principle. Account Description Debit Credit Accounts receivableEquipmentGainAccumulated Depreciation-EquipmentNo EntryDepreciation ExpenseMiscellaneousAccounts payableCash $ Accumulated Depreciation-EquipmentAccounts payableMiscellaneousCashEquipmentGainNo EntryAccounts receivableDepreciation Expense $ 2. Millenium bought a custom-made piece of equipment for $36,000. This equipment has a useful life of 6 years. Millenium depreciates equipment using the straight-line method. "Since the equipment is custom-made, it will have no resale value. Therefore, it shouldn't be depreciated but instead should be expensed immediately," argues Scott. "Besides, it provides for lower net income." Violation: Full disclosure principleConservatismTime period assumptionCost principleEconomic entity assumptionMonetary Unit assumptionMaterialityMatching principleRevenue recognition principleGoing concern assumptionNo violation. Account Description Debit Credit EquipmentGainMiscellaneousCashDepreciation ExpenseAccounts receivableNo EntryAccounts payableAccumulated Depreciation-Equipment $ No EntryDepreciation ExpenseMiscellaneousAccounts receivableAccounts payableEquipmentCashGainAccumulated Depreciation-Equipment $ 3. Depreciation for the year was $18,000. Since net income is expected to be lower this year, Scott suggests deferring depreciation to a year when there is more net income. Violation: Revenue recognition principleTime period assumptionNo violationMonetary Unit assumptionCost principleMaterialityConservatismMatching principleFull disclosure principleGoing concern assumptionEconomic entity assumption. Account Description Debit Credit MiscellaneousAccumulated Depreciation-EquipmentNo EntryAccounts receivableAccounts payableEquipmentCashGainDepreciation Expense $ No EntryEquipmentDepreciation ExpenseMiscellaneousCashAccounts receivableGainAccounts payableAccumulated Depreciation-Equipment $ 4. Land costing $60,000 was appraised at $90,000. Scott suggests the following journal entry. Account Description Debit Credit Land $30,000 Gain on Appreciation of Land $30,000 Violation: Cost principleFull disclosure principleMaterialityMonetary Unit assumptionConservatismGoing concern assumptionMatching principleTime period assumptionRevenue recognition principleEconomic entity assumptionNo violation. Account Description Debit Credit Accumulated Depreciation-EquipmentAccounts receivableAccounts payableEquipmentMiscellaneousCashGainNo EntryDepreciation Expense $ CashAccounts payableGainNo EntryAccounts receivableAccumulated Depreciation-EquipmentDepreciation ExpenseMiscellaneousEquipment $ 5. Millenium purchased equipment for $35,000 at a going-out-of-business sale. The equipment was worth $45,000. Scott believes that the following entry should be made. Account Description Debit Credit Equipment $45,000 Cash $35,000 Gain on Purchase of Equipment $10,000 Violation: Full disclosure principleEconomic entity assumptionRevenue recognition principleCost principleMonetary Unit assumptionMatching principleNo violationMaterialityConservatismGoing concern assumptionTime period assumption. Account Description Debit Credit Accounts payableMiscellaneousAccumulated Depreciation-EquipmentAccounts receivableCashGainEquipmentDepreciation ExpenseNo Entry $ No EntryAccumulated Depreciation-EquipmentAccounts payableMiscellaneousAccounts receivableEquipmentGainCashDepreciation Expense $