Question

Carleton Builders Ltd recorded the following summarized transactions during the current year:

a. The company originally sold and issued 104,000 common shares. During the current year 8.000 shares were repurchased from the shareholders and retired. Near the end of the current year, the board of directors declared and paid a cash dividend of $7 per share. The dividend was recorded as follows:

b. Cateton Builders Ltd. purchased a machine that had a list price of $94,000. The company paid for the machine in full by issuing 10.000 common shares (market price = $8.70. The purchase was recorded as follows

c. Catletonneeded a small structure for temporary storage. A contractor quoted a price of $773,000. The company decided to build the structure itself the cost was $544,000, and construction required three months. The following entry was made)

d. Carleton owns a plant located on a river that floods occasionally. A severe flood occurred during the current year, causing an uninsured loss of $93,000 (measured as the amount spent to repair the flood damage). The following entry was made.

e. On 28 December, the company collected $11,000 cash in advance for merchandise to be shipped in January. The company's fiscal year-end is 31 December. This transaction was recorded on 28 December as follows:

Required:

For each transaction, select which accounting principle was violated.

1-a The company originally sold and issued 104,000 common shares. During the current year 8,000 shares were repurchased from the shareholders and retired. Near the end of the current year, the board of directors declared and paid a cash dividend of $7 per share:

• Revenue recognition principle and faithful representation

• Historical cost principle and revenue recognition

• Cost principle

• Faithful representation

1-b. Carleton Builders Ltd. purchased a machine that had a list price of $94,000. The company paid for the machine in full by issuing 10,000 common shares (market price =$8.70).

•  Revenue recognition principle and faithful representation

• Historical cost principle and revenue recognition

• Cost principle

• Faithful representation

1-c. Caleton needed a small structure for temporary storage. A contractor quoted a price of $773,000. The company decided to build, the structure itself. The cost was $544,000, and construction required three months.

• Revenue recognition principle and faithful representation

• Historical cost principle and revenue recognition

• Cost principle

• Faithful representation.

1-d. Carleton owns a plant located on a river that floods occasionally. A severe flood occurred during the current year, causing an uninsured loss of $93,000 (measured as the amount spent to repair the flood damage).

• Revenue recognition principle and faithful representation

• Historical cost principle and revenue recognition

• Cost principle

• Faithful representation

1-e. On 28 December, the company collected $71,000 cash in advance for merchandise to be shipped in January. The company's fiscal year-end is 31 December.

• Time period and faithful representation

• Historical cost principle and revenue recognition]

• Cost principle

• Faithful representation

3. In each instance, indicate how the transaction should have been originally recorded. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Journal Amount (S) Debit Credit S.no - 1 Account Title and Explanations 1 672,000.00 Dividend To Dividend Payable (Being dividend declared) 672,000.00 2 672,000.00 Dividend Payable To Cash (Being dividend paid) 672,000.00 3 672,000.00 Retained Earning To Dividend (Being amount tranfred to retained) 672,000.00 Total 2,016,000.00 2,016,000.00

Journal Amount (S) Debit Credit S.no - 2 Account Title and Explanations 1 94,000.00 Machine To Vendor for Machine Being machine purchased) 94,000.00 2 94,000.00 Vendor for Machine To Common stock To Excess over common stock (Being shares issued to vendor) 87,000.00 7,000.00 Total 188,000.00 188,000.00

Journal Amount (S) Debit Credit S.no - 3 Account Title and Explanations No Entry Required Note : As the construction has not been started neither any cost has been incurred uptill now. Total

Journal Amount (S) Debit Credit S.no - 4 Account Title and Explanations 93,000.00 Loss due to flood To Plant Being loss due to flood) 93,000.00 Total 93,000.00 93,000.00 Journal Amount (S) Debit Credit S.no - 5 Account Title and Explanations 71,000.00 Cash To Advance from customer Being advance received from customer) 71,000.00 Total 71,000.00 71,000.00

Answers for the MCQs-

1-a	Revenue Recognition and Faithful representation
1-b	Revenue Recognition and Faithful representation
1-c	Historical Cost Principle and Revenue recognition
1-d	Cost principle
1-e	Time Period and faithful representation

Answer 2

Correct Answers for the MCQs-

1-a	Revenue Recognition and Faithful representation
1-b	Historical cost principle and revenue recognition
1-c	Historical Cost Principle and Revenue recognition
1-d	Faithful representation
1-e	Faithful representation

Answer 3

for above answer, please do check for the figures in your assignment. My answer's figure may be different than yours.

Answer 4