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Because the general level of prices increased during the current year, Gravenhurst Inc.

4.Because the general level of prices increased during the current year, Gravenhurst Inc. determined that there was a $15,000 understatement of depreciation expense on its equipment and decided to record it in its accounts. The following entry was made: 


Depreciation Expense

15,000

 

Accumulated Depreciation—Equipment

 

15,000


 

Instructions

In each of the above situations, discuss the appropriateness of the journal entries in terms of generally accepted accounting principles. For the purposes of your discussion, assume that the financial statements, particularly net income, will be used by the court in a divorce settlement for the company president's spouse.

Top Answer

General increase in prises is refereed to as inflation. With inflation, general priceswill go up including the... View the full answer

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