Carleton Builders Ltd. recorded the following summarized transactions during the current year:a. The company originally sold and issued 108,000 common shares. During the current year 10,000 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 $9 per share. The dividend was recorded as follows:  General Journal Debit   Credit Retained earnings 972,000     Cash ($9 × 98,000)     882,000  Dividend income ($9 × 10,000)     90,000   Carleton Builders Ltd. purchased a machine that had a list price of $98,000. The company paid for the machine in full by issuing 10,000 common shares (market price = $8.90). The purchase was recorded as follows: General Journal Debit   Credit Machine 98,000     Share capital ($8.90 × 10,000)     89,000 Gain on purchase of equipment     9,000   Carleton needed a small structure for temporary storage. A contractor quoted a price of $777,000. The company decided to build the structure itself. The cost was $546,000, and construction required three months. The following entry was made: General Journal Debit   Credit Buildings—warehouse 777,000     Cash     546,000 Revenue from self-construction     231,000   Carleton owns a plant located on a river that floods occasionally. A severe flood occurred during the current year, causing an uninsured loss of $95,000 (measured as the amount spent to repair the flood damage). The following entry was made: General Journal Debit   Credit Retained earnings, flood loss 95,000     Cash     95,000   On 28 December, the company collected $73,000 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: General Journal Debit   Credit Cash 73,000     Sales revenue     73,000   Required:For each transaction, select which accounting principle was violated.

Question

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

a. The company originally sold and issued 108,000 common shares. During the current year 10,000 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 $9 per share. The dividend was recorded as follows:
 

General Journal

Debit

 

Credit

Retained earnings

972,000

 

 

Cash ($9 × 98,000)

 

 

882,000

 Dividend income ($9 × 10,000)

 

 

90,000

 

  1. Carleton Builders Ltd. purchased a machine that had a list price of $98,000. The company paid for the machine in full by issuing 10,000 common shares (market price = $8.90). The purchase was recorded as follows:

General Journal

Debit

 

Credit

Machine

98,000

 

 

Share capital ($8.90 × 10,000)

 

 

89,000

Gain on purchase of equipment

 

 

9,000

 

  1. Carleton needed a small structure for temporary storage. A contractor quoted a price of $777,000. The company decided to build the structure itself. The cost was $546,000, and construction required three months. The following entry was made:

General Journal

Debit

 

Credit

Buildings—warehouse

777,000

 

 

Cash

 

 

546,000

Revenue from self-construction

 

 

231,000

 

  1. Carleton owns a plant located on a river that floods occasionally. A severe flood occurred during the current year, causing an uninsured loss of $95,000 (measured as the amount spent to repair the flood damage). The following entry was made:

General Journal

Debit

 

Credit

Retained earnings, flood loss

95,000

 

 

Cash

 

 

95,000

 

  1. On 28 December, the company collected $73,000 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:

General Journal

Debit

 

Credit

Cash

73,000

 

 

Sales revenue

 

 

73,000

 


Required:
For each transaction, select which accounting principle was violated.

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