QUESTION 4 (10 marks)

For each of the following transactions, state the accounting principle that has been applied or violated and provide an explanation.

(a) Good Job Car Repairing Company entered into an agreement to repair a truck for a customer at an agreed price of $50,000. The repair work started on December 1, 2019, and finished on January 31, 2020. The customer paid a deposit of $10,000 on December 1, 2019. The company recorded this amount as revenue for the year ended December 31, 2019. (5 marks)

(i) Name of Principle.

(ii) Indicate whether the Principle has been APPLIED or VIOLATED.

(iii) Explanation.

(b) Samson Wong is the owner of Samson Delivery Company. Recently Samson paid interest of $4,500 on a personal loan of $75,000 that he used to begin the business. The accountant of Samson Delivery Company recorded $4,500 as the companys interest expense. (5 marks)

(i) Name of Principle.

(ii) Indicate whether the Principle has been APPLIED or VIOLATED.

(iii) Explanation.