Czyz and Ng are accountants at Kwick Kopy Printers. Kwick Kopy has not adopted the revaluation model

Question:

Czyz and Ng are accountants at Kwick Kopy Printers. Kwick Kopy has not adopted the revaluation model for accounting for its property, plant, and equipment. The accountants are having disagreements over the following transactions during the fiscal year ended December 31, 2017:

1. Kwick Kopy bought equipment on January 1, 2017, for $80,000, including installation costs. The equipment has a useful life of five years. Kwick Kopy depreciates equipment using the double diminishing-balance method. "Since the equipment as installed in our system cannot be removed without considerable damage, it will have no resale value. It should not be depreciated but, instead, expensed immediately," Czyz argues.

2. Depreciation for the year was $43,000. Since the company's profit is expected to be low this year, Czyz suggests deferring depreciation to a year when there are higher profits.

3. Kwick Kopy purchased equipment at a fire sale for $36,000. The equipment would normally have cost $50,000. Czyz believes that the following entry should be made:

4. Czyz says that Kwick Kopy should carry its furnishings on the balance sheet at their liquidation value, which is $30,000 less than cost.
5. Kwick Kopy rented office space for one year, effective September 1, 2017. Six months of rent at $3,000 per month was paid in advance. Czyz believes that the following entry should be made on September 1:

6. Land that cost $41,000 was appraised at $60,000. Czyz suggests the following journal entry:

Ng disagrees with Czyz in each of the situations.
Instructions
(a) For each transaction, indicate why Ng disagrees. Support your answer with reference to the conceptual frame-work definition of elements, qualitative characteristics, assumption, constraint, recognition, and measurement criteria.
(b) Prepare the correct journal entry to record each transaction.
TAKING IT FURTHER
Discuss the circumstances in which it is appropriate to record property, plant, and equipment at its liquidation value.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Liquidation
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due....