Martindale Ltd uses the historical cost system. While reviewing the business activities of the company, you discover that the following transactions and events were recorded. Ignore GST.

1. Ending inventory for the current year had a cost of $115200 and a selling price of $102000. The inventory was valued at cost because the company’s accountant believed that ‘the selling price will probably increase again during the next year’.

2. On 28 December of the current year, Martindale Ltd signed a contract with a customer under which Martindale Ltd agreed to manufacture equipment for the customer during January of the following year at a price of $39000. Martindale Ltd received a cheque for $7500 from the customer on 28 December and made the following entry:

Accounts Receivable Cash at Bank Sales

31500 7500

39000

3. A new vehicle was purchased at an auction for cash of $32000. If purchased from the company’s normal supplier, the cash price of the machine would have been $38000. The Vehicles account was debited for $38000 and the following entry was made:

Vehicles Cash at Bank Gain from Bargain Purchase

38000

32000 6000

4. Ignition security locks were installed in each of Martindale Ltd’s six delivery trucks at a cost of $180 each. The trucks had an average remaining useful life of 5 years. The transaction was recorded as:

Repairs Expense Cash at Bank

1080

1080

5. Building improvements with an estimated useful life of 20 years were completed early in the current year at a cost of $120000. Martindale Ltd believed that the building to which the improvements were made could be used for only 15 years. To record depreciation for the current year, the accountant made the following entry:

Depreciation Expense Building Improvements

6000

6000

Required

For each of items (1) to (5), determine which accounting concept(s) (if any) is violated, and explain why. For each violation, indicate the correct treatment.