E8-4 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Depreciation (Straight- Line Depreciation) LO8-2, 8-3 [The following information applies to the questions displayed below.) During Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $27,000. On the date of delivery. January 2, the company paid $9,000 on the machine, with the balance on credit at 9 percent interest due in six months. On January 3, it paid $1,400 for freight on the machine. On January 5, Ashkar paid installation costs relating to the machine amounting to $2,300. On July 1, the company paid the balance due on the machine plus the interest. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $3,000. E8-4 Part 5 5. Determine the net book value of the machine at the end of Year 2. Note: Amounts to be deducted should be indicated by a minus sign. Net book value of machine at end of Year 2 $ Equipment (cost) Accumulated depreciation Net book value at end of year 2 30,700 meng 30,700

E8-4 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Depreciation (Straight- Line Depreciation) LO8-2, 8-3 [The following information applies to the questions displayed below.) During Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $27,000. On the date of delivery. January 2, the company paid $9,000 on the machine, with the balance on credit at 9 percent interest due in six months. On January 3, it paid $1,400 for freight on the machine. On January 5, Ashkar paid installation costs relating to the machine amounting to $2,300. On July 1, the company paid the balance due on the machine plus the interest. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $3,000. E8-4 Part 5 5. Determine the net book value of the machine at the end of Year 2. Note: Amounts to be deducted should be indicated by a minus sign. Net book value of machine at end of Year 2 $ Equipment (cost) Accumulated depreciation Net book value at end of year 2 30,700 meng 30,700

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Description: Vala E8-4 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Depreciation (Straight-Line Depreciation) LO8-2, 8-3[The following information applies to the questions displayed below.)During Year 1, Ashkar Company ordered a mach

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter9: Fixed Assets And Intangible Assets

Section: Chapter Questions

Problem 9.1BPR: Allocating payments and receipts to fixed asset accounts The following payments and receipts are...

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Allocating payments and receipts to fixed asset accounts The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale apparel business. The receipts are identified by an asterisk. A. Fee paid to attorney for title search............................................ 3,600 B. Cost of real estate acquired as a plant site: Land................................ 720,000 Building (to be demolished)........... 60,000 C. Finder's fee paid to real estate agency.......................................... 23,400 D. Delinquent real estate taxes on property, assumed by purchaser................. 15,000 E. Architect's and engineer's fees for plans for new building....................... 75,000 F. Cost of removing building purchased with land in (B)............................ 10,000 G. Proceeds from sale of salvage materials from old building....................... 3,400 H. Cost of filling and grading land................................................ 18,000 1. Premium on one-year insurance policy during construction...................... 8,400 J. Money borrowed to pay building contractor.................................... 800,000 K. Special assessment paid to city for extension of water main to the property....... 13,400 L. Cost of repairing windstorm damage during construction....................... 3,000 M. Cost of repairing vandalism damage during construction........................ 2,000 N. Cost of trees and shrubbery planted........................................... 14,000 0. Cost of paving parking lot to be used by customers............................. 21,600 P. Interest incurred on building loan during construction.......................... 40,000 Q. Proceeds from insurance company for windstorm and vandalism damage........ 4,500 R. Payment to building contractor for new building................................ 800,000 S. Refund of premium on insurance policy (1) canceled after 10 months............. 1,400 Instructions 1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows: Item Land Land Improvements Building Other Accounts 2. Determine the amount debited to Land. Land Improvements, and Building. 3. The costs assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation. 4. What would be the effect on the income statement and balance sheet if the cost of paving the parking lot of 21,600 [payment (0)] was incorrectly classified as Land rather than Land Improvements? Assume Land Improvements are depreciated over a 10-year life using the double-declining-balance method.
M8-15 Recording the Sale of PPE Assets Gaver Company sold machinery that had originally cost $75,000 for $25,000 in cash. The machinery was three years old and had been depreciated using the double-declining-balance method assuming a five- year useful life and a residual value of $5,000. a. Prepare a journal entry to record this sale. b. Using the financial statement effects template, show how the sale of the machinery affects the balance sheet and income statement
E9-1A Acquisition Cost of Long-Lived Asset The following data relate to a firm’s purchase of a machine used in the manufacture of its product: Invoice Price $30,000 Applicable sales tax $2,000 Cash discount taken for prompt payment $400 Freight paid $260 Cost of Insurance coverage on machine while in transit $125 Installation costs $3,000 Testing and adjusting costs $475 Repair of damages to machine caused by the firm’s employee $750…
E9-3 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Straight-Line Depreciation [LO 9-2, LO 9-3] O’Connor Company ordered a machine on January 1 at a purchase price of $100,000. On the date of delivery, January 2, the company paid $25,000 on the machine and signed a long-term note payable for the balance. On January 3, it paid $1,000 for freight on the machine. On January 5, O’Connor paid cash for installation costs relating to the machine amounting to $6,000. On December 31 (the end of the accounting period), O’Connor recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $10,700. Required: Indicate the effects (accounts, amounts, and + for increase, − for decrease) of each transaction (on January 1, 2, 3, and 5) on the accounting equation. Compute the acquisition cost of the machine. Compute the depreciation expense to be reported for the first year. What should be…
E8-28 Computing Depreciation and Accounting for a Change of Estimate In January 2016, Rankine Company paid $8,500,000 for land and a building. An appraisal estimated that the land had a fair value of $2,500,000 and the building was worth $6,000,000. Rankine estimated that the useful life of the building was 30 years, with no residual value. a. Calculate annual depreciation expense using the straight-line method. b. Calculate depreciation for 2016 and 2017 using the double-declining-balance method. c. Assume that in 2018, Rankine changed its estimate of the useful life of the building to 25 years. If the company is using the double-declining-balance method of depreciation, what amount of depreciation expense would Rankine record in 2018?
E11-15 Asset Impairment On January 1, 2015, Vallahara Company purchased machinery for $650,000, which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of $50,000. Late in 2019, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of 5 years, over which it estimates the asset will produce total cash inflows of $1,000,000 and will incur total cash outflows of $825,000. The cash flows are independent of the company’s other activities and will occur evenly each year. Vallahara is not able to determine the fair value based on a current selling price of the machinery. Vallahara’s discount rate is 10%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry to record the…
E11-15 Asset Impairment On January 1, 2015, Vallahara Company purchased machinery for $650,000, which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of $50,000. Late in 2019, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of 5 years, over which it estimates the asset will produce total cash inflows of $1,000,000 and will incur total cash outflows of $825,000. The cash flows are independent of the company’s other activities and will occur evenly each year. Vallahara is not able to determine the fair value based on a current selling price of the machinery. Vallahara’s discount rate is 10%. Required: 4. Assuming that the recoverable amount of the machinery is determined to be $220,000 at the end of 2020, what entry will Vallahara make to record this increase in value under U.S. GAAP? Under IFRS?
SE9-5 Sale of a Building The Miller Company sold a building for $400,000 that had a book value of $450,000. The building had originally cost the company $12,000,000 and had accumulated depreciation to date of $11,500,000. Prepare a journal entry to record the sale of the building.
SE9-11 Sale of Equipment Prepare the journal entry for the following transactions (1) Geysler Company sold some old equipment that initially cost $30, 000 and had $25,000 of accumulated depreciation and received cash in the amount of $3,000. (2) Assume the facts except Geysler received $9,000.
5BE11-8 Jurassic Company owns equipment that cost $900,000 and has accumulated depreciation of $380,000. The expected future net cash flows from the use of the asset are expected to be $500,000. The fair value of the equipment is $400,000. Prepare the journal entry, if any, to record the impairment loss.
At December 31, 20X0, the following existed in the records of Loren Company: Fixed Assets - $8,600,000; Accumulated Depreciation - $3,970,000. During the year ended September 30,20X1, fixed assets with a written down value of $370,000 was sold for $490,000. The plant had originally cost $800,000. Fixed assets purchased during the year cost $1,800,000. It is the company's policy to charge a full year's depreciation in the year of acquisition of an asset and none in the year of sale, using a rate of 10% on the straight line basis. What net amount (book value) should appear in the statement of financial position as of September 30, 20X1 for fixed assets?
At the end of the year the Investment in Bacolod account of the home office isP300,500. However, there are transactions discovered to have errors.•Bacolod branch bought equipment on June 1, 2020 costing P63,800 for thehome office's use and the policy is to record the asset in Bacolod's books.During that time the home office recorded the equipment and credited itsreciprocal account of its Bacolod branch.•The policy of the company regarding the equipment's depreciation is that ithas a life of 8 years with no salvage value and the straight-line method shouldbe used. No entry has been made by the home office and branch.•The home office ships merchandise to Bacolod amounting to P96,700. Bacolodrecorded the transaction as P97,600•Bacolod pays the home office's creditors in the amount of P32,400 and sends adebit memo to the home office.•Upon receipt of the debit memo, the home office debited its reciprocalaccount in the amount of P23,400 twice.What is the unadjusted balance of the home office…