As the recently appointed auditor for Bramble Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2020, are prepared. The controller for Bramble Corporation mentions that only one account is kept for intangible assets. The account is shown below. Intangible Assets Debit Credit Balance Jan. 4 Research and development costs 932,000 932,000 Jan. 5 Legal costs to obtain patent 72,480 1,004,480 Jan. 31 Payment of 7 months' rent on property leased by Bramble 85,400 1,089,880 Feb. 11 Premium on common stock 232,000 857,880 March 31 Unamortized bond discount on bonds due March 31, 2040 88,800 946,680 April 30 Promotional expenses related to start-up of business 216,800 1,163,480 June 30 Operating losses for first 6 months 247,500 1,410,980 Prepare the entries necessary to correct this account. Assume that the patent has a useful life of 10 years. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit

As the recently appointed auditor for Bramble Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2020, are prepared. The controller for Bramble Corporation mentions that only one account is kept for intangible assets. The account is shown below. Intangible Assets Debit Credit Balance Jan. 4 Research and development costs 932,000 932,000 Jan. 5 Legal costs to obtain patent 72,480 1,004,480 Jan. 31 Payment of 7 months' rent on property leased by Bramble 85,400 1,089,880 Feb. 11 Premium on common stock 232,000 857,880 March 31 Unamortized bond discount on bonds due March 31, 2040 88,800 946,680 April 30 Promotional expenses related to start-up of business 216,800 1,163,480 June 30 Operating losses for first 6 months 247,500 1,410,980 Prepare the entries necessary to correct this account. Assume that the patent has a useful life of 10 years. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 9P: During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the...

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At the end of 2020, while auditing Sandlin Companys books, before the books have been closed, you find the following items: a. A building with a 30-year life (no residual value, depreciated using the straight-line method) was purchased on January 1, 2020, by issuing a 90,000 non-interest-bearing, 4-year note. The entry made to record the purchase was a debit to Building and a credit to Notes Payable for 90,000; 12% is a fair rate of interest on the note. b. The inventory at the end of 2020 was found to be overstated by 15,000. At the same time, it was discovered that the inventory at the end of 2019 had been overstated by 35,000. The company uses the perpetual inventory system. c. For the last 3 years, the company has failed to accrue salaries and w-ages. The correct amounts at the end of each year were: 2018, 12,000; 2019, 18,000; and 2020, 10,000. Required: 1. Prepare journal entries to correct the errors. Ignore income taxes. 2. Assume, instead, that the company discovered the errors after it had closed the books. Prepare journal entries to correct the errors. Ignore income taxes.
During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record depreciation expense for 2019.
At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the following three situations: 1. Machine X was purchased for 100,000 on January 1, 2015. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 45,000. The estimated residual value remains at 10,000, but the service life is now estimated to be 1 year longer than originally estimated. 2. Machine Y was purchased for 40,000 on January 1, 2018. It had an estimated residual value of 4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years-digits method for 2 years. Now, the company has decided to change to the straight-line method. 3. Machine Z was purchased for 80,000 on January 1, 2019. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is 8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2020. Ignore income taxes.
As the recently appointed auditor for Bryan Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2020, are prepared. The controller for Bryan Corporation mentions that only one account is kept for intangible assets. The account is shown below. Intangible Assets Debit Credit Balance Jan. 4 Research and development costs 940,000 940,000 Jan. 5 Legal costs to obtain patent 75,000 1,015,000 Jan. 31 Payment of 7 months' rent on property leased by Bryan 91,000 1,106,000 Feb. 11 Premium on common stock 250,000 856,000 March 31 Unamortized bond discount on bonds due March 31, 2040 84,000 940,000 April 30 Promotional expenses related to start-up of business 207,000 1,147,000 June 30 Operating losses for first 6 months 241,000 1,388,000 Instructions Prepare the entry or entries necessary to correct this account. Assume that the patent has a useful life of 10…
Assume REH AG, a hypothetical company, incurs expenditures of €1,000 per monthduring the fiscal year ended 31 December 2009 to develop software for internal use.Under IFRS, the company must treat the expenditures as an expense until the softwaremeets the criteria for recognition as an intangible asset, after which time the expenditurescan be capitalized as an intangible asset.1. What is the accounting impact of the company being able to demonstrate that thesoftware met the criteria for recognition as an intangible asset on 1 February versus1 December?2. How would the treatment of expenditures diff er if the company reported under U.S.GAAP and it had established in 2008 that the project was likely to be completed?
Assume REH AG, a hypothetical company, incurs expenditures of AC1,000 per month during the fiscal year ended December 31, 2019 to develop software for internal use. Under IFRS, the company must treat the expenditures as an expense until the software meets the criteria for recognition as an intangible asset, after which time the expenditures can be capitalized as an intangible asset. 1 What is the accounting impact of the company being able to demonstrate that the software met the criteria for recognition as an intangible asset on February 1 versus December 1? 2 How would the treatment of expenditures differ if the company reported under US GAAP and it had established in 2018 that the project was likely to be completed and the software used to perform the function intended?
You were assigned to audit the Property, plant and equipment account of your continuing audit client Lolita Corp. for the period ended December 31, 2021. The PPE file in the permanent working paper and in the prior year working paper included the following schedule: All assets were acquired at the inception of operations at the beginning of 2019 and are being depreciated through the following policies: Office Building – Double-declining balance over 20 years (10% salvage value based on cost) Factory Building – SYD over 15 years (10% salvage value based on cost) Office Equipment – Straight-line method over 8 years (no salvage value) Factory Machineries – SYD over 10 years (10% salvage value based on cost) Transactions for 2021 were as follows: An new elevator system costing P800,000 was installed on the company’s Office Building and was completed in early January. On March 31, the company traded a new factory machinery with a cash…
You were assigned to audit the Property, plant and equipment account of your continuing audit client Lolita Corp. for the period ended December 31, 2021. The PPE file in the permanent working paper and in the prior year working paper included the following schedule: All assets were acquired at the inception of operations at the beginning of 2019 and are being depreciated through the following policies: Office Building – Double-declining balance over 20 years (10% salvage value based on cost) Factory Building – SYD over 15 years (10% salvage value based on cost) Office Equipment – Straight-line method over 8 years (no salvage value) Factory Machineries – SYD over 10 years (10% salvage value based on cost) Transactions for 2021 were as follows: An new elevator system costing P800,000 was installed on the company’s Office Building and was completed in early January. On March 31, the company traded a new factory machinery with a cash…
You have been assigned to audit the MACHINERY account of WHITE Printing Corporation for the year ended December 31, 2020. In the course of your examination, you found out that your client acquired on July 1, 2020 three printing machines for a list price of ₱280,000 with a 10% trade discount, term 2/10, n/60. The liability was fully paid on September 1, 2020. In addition, freight charges of ₱1,040 and cost of installation of P5,000 were paid. The client recorded the transactions under machinery account for ₱280,440. Assuming that the annual depreciation rate is 10% and that the client has already recorded the 2020 depreciation without correcting the asset account. The audit adjustment to be recorded to correct the depreciation in 2020, assuming that the books are already closed will be: DR: Accumulated depreciation - ₱ 1,120; CR: Depreciation expense - ₱ 1,120 DR: Retained earnings - ₱ 1,120; CR: Depreciation expense - ₱ 1,120 DR: Accumulated depreciation - ₱ 1,372; CR: Retained…
You have been assigned to audit the MACHINERY account of WHITE Printing Corporation for the year ended December 31, 2020. In the course of your examination, you found out that your client acquired on July 1, 2020 three printing machines for a list price of ₱280,000 with a 10% trade discount, term 2/10, n/60. The liability was fully paid on September 1, 2020. In addition, freight charges of ₱1,040 and cost of installation of P5,000 were paid. The client recorded the transactions under machinery account for ₱280,440. How much is the Machinery account overstated?
As the accountant of a manufacturing company, you have been asked to recommend a depreciation method that will be used in measuring and reporting all fixed assets of the company. With your vast knowledge in accounting principles and in compliances with generally accepted accounting standards, you came up with the following proposed methods for the approval of the management; Method I: Straight Line Method Method II: Written Down Value Method at 59% The company bought a machine for OMR 175,000 on January 1, 2019. The machine is expected to be useful for 4 years and has an estimated salvage value of OMR 5,000. Using method I Straight Line Method, compute the annual depreciation. 2. Complete the following table if straight line method is used; Year Depreciation Expense Accumulated Depreciation Book Value…
As the accountant of a manufacturing company, you have been asked to recommend a depreciation method that will be used in measuring and reporting all fixed assets of the company. With your vast knowledge in accounting principles and in compliances with generally accepted accounting standards, you came up with the following proposed methods for the approval of the management; Method I: Straight Line Method Method II: Written Down Value Method at 59% The company bought a machine for OMR 175,000 on January 1, 2019. The machine is expected to be useful for 4 years and has an estimated salvage value of OMR 5,000. Using Method II Written Down Value at 59% per annum. Complete the table below. Year Book Value (Beg) Depreciation at 59% p.a. Book Value (End) 2. Which method will you recommend to management? Why?