The following transactions took place in December 2024 for MegaMart. MegaMart uses the contract-based approach to revenue recognition and a perpetual inventory system. MegaMart estimates returns at 1% of sales. 

Dec. 4 Purchased a building for $200,000 by borrowing $160,000 from the bank and paying the rest in cash. 

10 Received an offer from a competitor to purchase the business for $400,000. 

15 Sold goods that cost $8,000 for $15,000 cash. 

18 Ordered new office furniture that will be delivered in February 2025. 

20 Sold $18,000 of goods to TinyTown Toys, n/30. The goods cost MegaMart $10,000. There is no uncertainty about TinyTown’s ability to pay the amount owing. 

24 Paid employee wages in the amount of $4,000. 

31 Received a $1,200 invoice for electricity for the month of December. 

31 Recorded depreciation on store equipment of $3,000.

Instructions 

For each of the above transactions, indicate what element(s) will be affected (if any). If no element is affected, explain why.

Discuss the importance of having precisely defined elements for the financial statements.