On April 1, 2017, Ayayai Corp. paid $ 45100 cash for equipment that will be used...

On April 1, 2017, Ayayai Corp. paid $ 45100 cash for equipment that will be used in business operations. The equipment will be used for four years. Ayayai's records depreciation expense of $ 45100 for the calendar year ending December 31, 2017. Which accounting principle has been violated?

A. Cash principle.

B. No principle has been violated.

C. Depreciation principle.

D. Expense recognition principle.

Solutions

Expert Solution

Ans (C ) Ayayai Corporation violated depreciation principle because its charge whole amount of equipment purchase as an expense in the year of purchase.

Depreciation: Fixed Assets are used in the business for more than one accounting period, Fixed assets is also called depreciable assets. Depreciation means decline in the value of fixed assets due to use, passage of time or obsolescence.

Cash Principle: As per Cash Principle entries are recorded in the books when cash is actually received or paid.

Depreciation Principle: The calculation of depreciation expense followed matching principle.

Matching principle states that expenses incurred in an accounting period should be matched with revenues during the period. Cost like depreciation of fixed assets is divided over the periods during which the asset is used.

Expense Recognition Principle: This principle states that expense must be recognized in the same year in which revenue associated with these expense are also recognized.

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

On March 1, 2020, Ayayai Corp. acquired a 10-unit residential complex for $1,280,000, paid in cash....

On March 1, 2020, Ayayai Corp. acquired a 10-unit residential complex for $1,280,000, paid in cash. An independent appraiser determined that 75% of the total purchase price should be allocated to buildings, with the remainder allocated to land. On the date of acquisition, the building’s estimated useful life was 25 years, with estimated residual value of $325,200. Ayayai estimates that straight-line depreciation would best reflect the pattern of benefits it will receive from the building. Fair value of the complex,...

On April 1, 2017, Lombardi Corp. was awarded $460,000 cash as compensation for the forced sale...

On April 1, 2017, Lombardi Corp. was awarded $460,000 cash as compensation for the forced sale of its land and building, which were directly in the path of a new highway. The land and building cost $60,000 and $280,000, respectively, when they were acquired. At April 1, 2017, the accumulated depreciation for the building amounted to $165,000. On August 1, 2017, Lombardi purchased a piece of replacement property for cash. The new land cost $160,000 and the new building cost...

. On January 1, 2017, Leahy Corp. paid $600,000 to acquire Fischer Co. Leahy used the...

. On January 1, 2017, Leahy Corp. paid $600,000 to acquire Fischer Co. Leahy used the equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Fischer: Book Value Fair Value Current Assets $ 95,000 $ 95,000 Land 87,500 118,500 Building (25-year life) 265,000 290,000 Equipment (10-year life) 207,500 186,500 Current liabilities 20,000 20,000 Long-term liabilities 70,000 70,000 Common Stock 136,500 Additional Paid-in Capital 250,000 Retained Earnings 178,500 ...

The stockholders’ equity accounts of Ayayai Corp. on January 1, 2017, were as follows. Preferred Stock...

The stockholders’ equity accounts of Ayayai Corp. on January 1, 2017, were as follows. Preferred Stock ( 7%, $ 100 par noncumulative, 4,200 shares authorized) $ 252,000 Common Stock ($ 3 stated value, 336,000 shares authorized) 840,000 Paid-in Capital in Excess of Par Value—Preferred Stock 12,600 Paid-in Capital in Excess of Stated Value—Common Stock 537,600 Retained Earnings 691,500 Treasury Stock ( 4,200 common shares) 33,600 During 2017, the corporation had the following transactions and events pertaining to its stockholders’ equity. Feb. 1...

On April 1, Year8, the premium on a one-year insurance policy on equipment was paid. The...

On April 1, Year8, the premium on a one-year insurance policy on equipment was paid. The premium was $3,000. The company does not have any other insurance policies. The financial statements as of 12/31/Year8 would report: a. Insurance expense $750; Prepaid insurance $2,250. b. Insurance expense $0; Prepaid insurance $3,000. c. Insurance expense $2,250; Prepaid insurance $750. d. Insurance expense $2,000; Prepaid insurance $1000. e. Insurance expense $3,000; Prepaid insurance $0.

Labels and Amount Descriptions Cash paid for dividends Cash paid for purchase of equipment Cash paid...

Labels and Amount Descriptions Cash paid for dividends Cash paid for purchase of equipment Cash paid for purchase of land Cash paid for purchase of treasury stock Cash payments for income taxes Cash payments for merchandise Cash payments for operating expenses Cash received from customers Cash received from sale of common stock Cash received from sale of investments Change in cash December 31, 20Y6 Depreciation For the Year Ended December 31, 20Y6 Gain on sale of investments Issuance of common...

Joyce is a single, cash-method taxpayer. On April 11, 2017, Joyce paid $120 in state income...

Joyce is a single, cash-method taxpayer. On April 11, 2017, Joyce paid $120 in state income taxes with her 2016 state income tax return. During 2017, Joyce had $1,600 in state income taxes withheld. On April 13, 2018, Joyce paid $200 with her 2017 state tax return. During 2018, she had $2,100 in state income taxes withheld from her paycheck. Upon filing her 2018 tax return on April 15, 2019, she received a refund of $450 for excess state income...

Joyce is a single, cash-method taxpayer. On April 11, 2017, Joyce paid $ 120 state income...

Joyce is a single, cash-method taxpayer. On April 11, 2017, Joyce paid $ 120 state income taxes with her 2016 state income tax return. During 2017, Joyce had $ 1 comma 600 in state income taxes withheld. On April 13, 2018, Joyce paid $ 200 with her 2017 state tax return. During 2018, she had $ 2 comma 100 in state income taxes withheld from her paycheck. Upon filing her 2018 tax return on April 15, 2019, she received a...

Joyce is a single, cash-method taxpayer. On April 11, 2017, Joyce paid $ 120 state income...

On December 1, 2017, Bridgeport Corp. had the account balances shown below. Cash $5,210 Accumulated Depreciation—Equipment...

On December 1, 2017, Bridgeport Corp. had the account balances shown below. Cash $5,210 Accumulated Depreciation—Equipment $1,570 Accounts Receivable 3,690 Accounts Payable 3,040 Inventory (2,700 x $0.60) 1,620 Common Stock 9,300 Equipment 22,000 Retained Earnings 18,610 $32,520 $32,520 The following transactions occurred during December. Dec. 3 Purchased 3,700 units of inventory on account at a cost of $0.66 per unit. 5 Sold 4,100 units of inventory on account for $0.90 per unit. (It sold 2,700 of the $0.60 units and...

Subjects