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... Showed first 250 characters
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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... Showed next 250 characters
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Music Mart Case 2-2
BALANCE SHEET AS OF ______
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Current assets: Current liabilities:
Cash $25,636 Notes payable $ 6,500
Accounts receivable 2,620 Accounts payable 5,000
Inventory 4,700 Total current liabilities 11,500
Prepaid insurance 1,224
Total current assets 34,180 Other liabilities:
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Total liabilities 20,500
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Total assets $46,180 Total liabilities
and owners’ equity
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