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E2-9 (LOG GROUPWORK Accounting Principles and Assumptions Comprehensive Presented below are a number of business transactions that occurred during the current year for Gonzales, Inc. Instructions In each of the situations, discuss the appropriaters of the journal entries in terms of generally accepted accounting principles Cal The president of Gonzales, Inc. used his expense account to purchase a new Suburban solely for personal use. The fol lowing journal entry was made Miscellaneous Exp 29.000 29.00 (b) Merchandise inventory that cost $620,000 is reported on the balance sheet at 0,000, the expected selling price less estimated selling costs. The following entry was made to record this increase in value Salve ( The company is being sued for $500,000 by a customer who claim damages for personal injury apparently caused by a defective product. Company attorneys feel extremely confident that the company will have no liability for damages resulting from the situation. Nevertheless, the company decides to make the following entry La Lawsuit 500 Liability for Lawsuit 500. (d) Because the general level of prices increased during the current year, Gonzales, Inc, determined that there was a $16,000 understatement of depreciation expense on its equipment and decided to record it in its accounts. The following entry was made Depreciation Expense 16.00 Accumulated Depreciation Equipment 16.000 le) Gonzales, Inc. has been concerned about whether intangible assets could generate cash in case of liquidation. As a con- sequence, goodwill arising from a purchase transaction during the current year and recorded at 800,000 was written of as follows Retained Earnings 0.000 Goodwill 800,000 t Because of a fire sale," equipment obviously worth $200,000 was acquired at a cost of $155.000. The following entry was made Equipment Cash 155.000 Sales Revenue 45 E2-10 (LOG) GROUPWORK (Accounting Principles Comprehensive Presented below is information related to Cramet Inc Instructions Comment on the appropriateness of the accounting procedures followed by Cramer, Inc. a Depreciation expense on the building for the year was 0.000. Because the building was increasing in value during the year, the controller decided to change the depreciation expense to mained earningsinstead of tonet income. The fol lowing entry is recorded Retained Earnings DO Accumulated Depreciation-Buildings 60.000 to Materials were purchased on January 1, 2017, for 5120.000 and this amount was entered in the Materials count December 31, 2017, the materials would have cost $141.000, so the following entry is made 21000 Inventory Gain on Inventories id During the year, the company purchased equipment through the issuance of common stock. The stock had a pur value of $135.0 and a fair value of $450.000 The fair value of the equipment was not easily determinable. The company recorded this transaction as follows. Equipment Common Stock 115.000 (d) During the year, the company sold certain equipment for $285.000, recognizing again of 69,000. Because the controller believed that new equipment would be needed in the near future, she decided to defer the pain and amortize it over the life of any new equipment purchased

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