Assignment 7 - more net income. 4. Artemis purchased...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
ACCT 2111 Introductory Financial Accounting Assignment for Chapter 7 Venus and Latona are accountants for Artemis Printers. They disagree over the following transactions that occurred during the year. 1. Land costing $205,000 was appraised at $245,000. Venus suggests the following journal entry. Land 40,000 Gain on Appreciation of Land 40,000 2. Artemis bought equipment for $300,000, including installation costs. The equipment has a useful life of 5 years. Artemis depreciates equipment using the straight-line method. “Since the equipment as installed into our system cannot be removed without considerable damage, it will have no resale value. Therefore, it should not be depreciated, but instead should be expensed immediately,” argues Venus. “Besides, it lowers net income.” 3. Depreciation for the year was $130,000. Since net income is expected to be lower this year, Venus suggests deferring depreciation to a year when there is
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: more net income. 4. Artemis purchased equipment at a fire sale for $90,000. The equipment was worth $130,000. Venus believes that the following entry should be made. Equipment 130,000 Cash 90,000 Gain on Purchase of Equipment 40,000 5. Venus suggests that Artemis should carry equipment on the balance sheet at its liquidation value, which is $100,000 less than its cost. 6. Artemis rented office space for 1 year starting October 1, 2008. The total amount of $120,000 was paid in advance. Venus believes that the following entry should be made on October 1. Rent Expense 120,000 Cash 120,000 Latona Disagrees with Venus on each of the situations above. Instructions For each transaction, indicate why Latona disagrees. Identify the accounting principle or assumption that Venus would be violating if her suggestions were used. Prepare the correct Journal entry for each transaction, if any....
View Full Document

This note was uploaded on 11/07/2010 for the course BBA 1023 taught by Professor Dkwidkdksiw during the Spring '10 term at City University of Hong Kong.

Ask a homework question - tutors are online