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Question 1 (9 marks) Selected independent transactions listed below were recorded during the current year. Required: 1. For each transaction, determine which accounting principle, if any, was violated. State the principle and explain briefly the violation (if any). 2. If there was a violation, show how the transaction should have been recorded (provide the journal entry). 3. If there was no violation and the correct entry was recorded, briefly explain your rationale for that and state that the correct entry was recorded. *You may not use faithful representation or relevance as your accounting principle in any of your responses. Transaction a) The company purchased equipment that had a fair value of $80,000, although there were few comparable transactions to support this $80,000 valuation. The company paid for the machine in full by issuing 5,000 common shares (market price $12.00 per share). The purchase was recorded as follows: Equipment 80,000 Common shares 60,000 Gain on acquisition 20,000 b) In September, cash of $20,000 was collected from a customer, for a product to be delivered in October. The entry recorded in September was: Cash 20,000 Accounts Receivable 20,000 c) A golf equipment store purchased too much inventory in 2019 and has determined as they get ready to close for the season that their inventory is overstated by about $20,000. They don't anticipate being able to sell this inventory. They recorded the entry as follows: Cost of Goods Sold 20,000 Inventory 20.000

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