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Unformatted text preview: E2-7
(a) This entry violates the economic entity assumption. The company made a mistake
by charging this cost to the wrong economic body. (b) Revenue should be recognized when it is earned. An earnings process has not taken
place here. (c) The company is too traditional in its accounting. It is uncertain that the company
will have to pay. (d) It is misleading to stray from the cost principle. (e) It is inappropriate to accept liquidation in this instance. (f) Revenue should be recognized when it is earned. An earnings process has not taken
place here. E3-5 Depreciation Expense ($250 X 3) 750 Accumulated Depreciation—Equipment
Unearned Rent Revenue ($9,300 X 1/3) 750
3,100 Rent Revenue
Interest Expense 3,100
500 Interest Payable
Supplies Expense 500
1,950 Supplies ($2,800 – $850)
Insurance Expense ($300 X 3) 1,950
900 Prepaid Insurance 900 ...
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This note was uploaded on 01/01/2012 for the course ACCOUNTING Intermedia taught by Professor Varied during the Spring '11 term at University of Science and Arts of Oklahoma.
- Spring '11