Homework Help: Advanced Accounting

Posted by Angie on Monday, December 3, 2012 at 11:16am.

Mr. Right and Mr. Wrong own an antique store in a partnership. They share profits and losses equally and receive an annual salary of $50,000, as per the partnership agreement. Mr. Right travels the country buying antiques. Mr. Wrong manages the store. From time to time, they use some of the small items from the store merchandise for personal use. Mr. Wrong’s daughter is getting married, and she loves an antique piece that costs $5,000. Mr. Wrong makes the following entry on the books to record the transaction:

Cost of goods sold $5,000 (Debit)
Inventory $5,000 (Credit)

1 - How should Mr. Wrong have recorded the transaction?
2 - What are the ethical aspects of Mr. Wrong’s action?

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