Scott and Quick are accountants for Millenium Computers. They disagree over the

Question

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: .

Explanation / Answer

1. It voltails the cost concept. As per cost concept we have to show its historical cost in the balnce sheet.That is XXX (not given) Not liquadation value.When ever it sold out then we have to show its loss / gain on the equipment in income statement as "loss/gain on sale of eqipment".

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