P1. (10 points) Comment on the appropriateness of the accounting procedures:

(a) Materials were purchased on January 1, Year 1, for $200,000 and this amount was entered in the Materials account. On December 31, Year 1, the materials would have cost $240,000, so the following entry was made:

Inventories 40,000

Gain on Inventories 40,000

(b) During the year, the company purchased equipment through the issuance of common stock. The stock had a par value of $20,000 and a fair value of 100,000. The fair value of the equipment was not easily determinable. The company recorded this transaction as follows.

Equipment 20,000

Common Stock 20,000

(c) On December 23, Year 1, an order of $48,000 has been received from a customer for products on hand. This order was shipped on January 10, Year 2. The company made the following entry in Year 1.

Accounts Receivable 48,000

Sales Revenue 48,000