After conducting an audit of the accounts of Iskra Ltd, you discover that the following transactions and events were recorded during the current year. Iskra Ltd uses the historical cost system.

Required

(a) For each item, determine which accounting concept(s) (if any) is violated, and explain why.

(b) For each violation, indicate the correct treatment.

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1. The company borrowed $600 000 from a bank at an interest rate of 10% to construct a new warehouse. At the completion of construction, the loan was repaid and the following entry was made: Bank Loan Warehouse Cash at Bank 600000 60 000 660 000 2. A patent with a cost of $80 000 was being amortised over its useful life of 4 years. The amortisation entry made at the end of the current year was: Retained Earnings Patents 20 000 20000 3. A speed-control device was installed on each of the company's 3 delivery trucks at a cost of $800 each plus GST. The transaction was recorded as follows: Maintenance Expense Cash at Bank 2400 2400 4. At the beginning of the current year, a new vehicle was purchased for $36 000. The vehicle had an estimated useful life of 4 years. Depreciation expense for the year was recorded as follows in order to avoid reporting a loss: Depreciation Expense Accumulated Depreciation Vehicle - 2000 2000