Scott and Quick are accountants for Millenium Computers. They disagree over the following transactions that occurred during the calendar year 2008.
Scott and Quick are accountants for Millenium Computers. They disagree over the following transactions that occurred during the calendar year 2008. For each transaction, indicate why Quick disagrees. Identify the accounting principle or assumption that Scott would be violating if his suggestions were used. Prepare the correct journal entry for each transaction, if any. (If there is no transaction, enter No entry as the description and 0 for the amount.)1. Scott suggests that equipment should be reported on the balance sheet at its liquidation value, which is $15,000 less than its cost. Violation: No violationEconomic entity assumptionMonetary Unit assumptionTime period assumptionMaterialityCost principleMatching principleFull disclosure principleRevenue recognition principleConservatismGoing Concern Assumption.Account Description Debit Credit$ 2. Millenium bought a custom-made piece of equipment for $36,000. This equipment has a useful life of 6 years. Millenium depreciates equipment using the straight-line method. “Since the equipment is custom-made, it will have no resale value. Therefore, it shouldn’t be depreciated but instead should be expensed immediately,” argues Scott. “Besides, it provides for lower net income.” Violation: MaterialityFull disclosure principleRevenue recognition principleNo violationMatching principleMonetary Unit assumptionGoing concern assumptionConservatismTime period assumptionCost principleEconomic entity assumption. Account Description Debit Credit$ 3. Depreciation for the year was $18,000. Since net income is expected to be lower this year, Scott suggests deferring depreciation to a year when there is more net income. Violation: Going concern assumptionTime period assumptionEconomic entity assumptionMatching principleCost principleMaterialityRevenue recognition principleNo violationFull disclosure principleConservatismMonetary Unit assumption. Account Description Debit Credit$ 4. Land costing $60,000 was appraised at $90,000. Scott suggests the following journal entry. Account Description Debit Credit$30,000 Violation: No violationGoing concern assumptionMonetary Unit assumptionConservatismRevenue recognition principleMaterialityTime period assumptionCost principleEconomic entity assumptionMatching principleFull disclosure principle. Account Description Debit Credit$ 5. Millenium purchased equipment for $35,000 at a going-out-of-business sale. The equipment was worth $45,000. Scott believes that the following entry should be made. Account Description Debit Credit$35,000 $10,000 Violation: Monetary Unit assumptionNo violationFull disclosure principleConservatismRevenue recognition principleCost principleMaterialityMatching principleGoing concern assumptionTime period assumptionEconomic entity assumption. Account Description Debit Credit$ Click here if you would like to Show Work for this