E2-7 Model - no liability and so this entry should not be...

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a. This is not correct. The transactions of the president cannot be the transactions of the company. Under the economic entity assumption, these are to treated as personal expense of the President. b. The is a violation of cost principle and revenue recognition. The asset has to be valued at cost and the selling price can be recorded only when the sale takes place. c. This is not correct to recognize the liability. The liability can be recognized if it is probable and the amount can be estimated. In this case the attorneys feel that there will be
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Unformatted text preview: no liability and so this entry should not be made d. This is a violation of cost principle. Assets are depreciated at cost and the changes in price levels are not recorded. e. All accounting transactions are made with the going concern in mind and so it should not pass entries based on the what happens on liquidation. f. This is a violation of the cost principle. The asset has to be recorded at the price paid for its purchase, which may be different from the intrinsic value of the asset....
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This note was uploaded on 02/19/2010 for the course ACC 421 taught by Professor Unknown during the Spring '10 term at University of Phoenix.

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