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Please remember to

state the number for part B ~

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Question A3 (10%)
The following events were occurred in Premier Book Company Limited ("Premier Book"):
(1) During December 2019, Premier Book recorded revenue when $50,000 books coupons had
been sold out for cash of which only $47,000 books have been delivered to the customers.
(2) At the end of January 2020, Premier Book paid the cleaning services of $2,000 for
December 2019. The cleaning expense was recorded on the payment date.
(3) Premier Book paid an amount of $12,000 in December 2019 to rent an apartment for the
shareholder's daughter who was away at college. It was reported as December's rent
expense in the Premier Book's financial statements.
(4) Premier Book purchased a printing machine at $50,000 in September 2019. At the end of
December 2019, the accountant adjusted the value of printing machine to market value at
$55,000 and recorded a gain of $5,000.
Required:
For each of the events (1) to (4) described above,
(a) identify the relevant accounting principle that has been violated. (4 marks)
(b) indicate the effect (with dollar amount) of each of the above error on the financial
statement of Premier Book at the end of December 2019_described in the column
headings in the table below. Use the following symbols: O = overstated, U = understated
and NE = no effect.
Assets
Liabilities
Equity
(1)
(2)
(3)
(4
(6 marks)

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