Indicate in each case whether the item has been handled in accordance with generally accepted accounting principles. If so, indicate the key basic concept that has been followed. If not, indicate which concept has been violated and tell how the item should have been recorded or presented. Remember to explain your reasoning.

1.Lauren Fox owns a snow removal business in Maine. Customers who will be vacationing in Florida for the winter must make a deposit of one-half of the seasonal rate on September 1, the last date to make arrangements to have their sidewalks and driveways plowed throughout the winter while they are gone. The balance is due on November 1. At the time deposits are received, Fox records them as revenue.

Refunds, if any, are treated as expenses at the time they are made. 2.. The Dollar Store sells such items as discontinued products and merchandise purchased from bankrupt companies. Freight costs on goods purchased are quite high. The company adds the freight costs to the purchase price and treats the total as cost of its merchandise inventory.