Music Mart Case 2-2

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No entry. in accordance with the basic principle of value. I think students who argue for appreciation are on weak ground. They have no support from the text. This, together with #6 may be used to contrast accounting with what some would say is the “common sense” or “logical” way to record the events, although it is too much to expect that the arguments in favor of the cost basis of valuation will be fully comprehended at this point...
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Decrease Notes Payable 6,000; decrease Cash 6,000. 12. No entry. This is not a transaction of the corporation, but rather a transaction between two outside parties. Note also that the book value of the equity is not changed, even though there is clear evidence that book value is less than market value or “real” value...
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