E2-7 (Accounting Principles-Comprehensive) Presented below are a number of business transactions that occurred during the current year for Fresh Horses, Inc.

(a) The president of Fresh Horses, Inc. used his expense account in order to purchase a brand new Suburban specifically for personal use. As a result, this journal entry was made.

Miscellaneous Expense 29,000 Cash 29,000 Purchasing a personal asset means getting a loan from a shareholder and its not classified as a business expense at all;although it would be considered distribution from the company.No expense is the matching principle.

(b) Merchandise inventory that cost 620,000 noted on the balance sheet at 690,000, and the anticipated selling price is less than the estimated selling costs. The following entry was...