question archive On January 1, 2009 LIZA Corp acquired an equipment from National Manufacturer and sign a three year non-interest bearing of face value $ 10000
On January 1, 2009 LIZA Corp acquired an equipment from National Manufacturer and sign a three year non-interest bearing of face value $ 10000
Subject:BusinessPrice: Bought3
On January 1, 2009 LIZA Corp acquired an equipment from National Manufacturer and sign a three year non-interest bearing of face value $ 10000.The fair value (present value) of the note on acquisition date was estimated to be $ 7500 which reflect an implicit interest rate on the note equal to 10% annually. The estimated useful life of 5 years and zero residual value and company usually used SLM to depreciate similar equipment .company subject to 40% tax rate. Company recorded the transaction by the following Journal entry: Dr. Equipment $ 10000 Cr. Note payable $ 10000. 1- Show the dollar amount impact, if any, and the nature of the effect (overstatement or understatement or no effect) of these accounting errors on the following financial statement items: F S items The impact on reporting value Net income 2009 Totale expenses for 2009 Owners Equity Dec. 31 2009 Note payables Dec. 31 2009 Total assert Dec. 31 2009 2- By making reference to the accounting theory conceptual framework, briefly discuss the consequences of this practice ( Ignoring implicit interest) & indicate the impact of this practice on Financial reporting, what assumptions, principles are violated or (and) accounting qualities that are negatively affected due to this practice ?
