New machinery, which replaced a number of employees,was installed and put in operation in the last month of thefiscal year. The employees had been dismissed afterpayment of an extra month’s wages, and this amount wasadded to the cost of the machinery. Discuss the propriety ofthe charge. If it was improper, describe the propertreatment.
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New machinery, which replaced a number of employees,
was installed and put in operation in the last month of the
fiscal year. The employees had been dismissed after
payment of an extra month’s wages, and this amount was
added to the cost of the machinery. Discuss the propriety of
the charge. If it was improper, describe the proper
treatment.
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- In January, Prahbu purchased for $100,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $4,075 to install the machine, and after the machine is installed, he pays $2,350 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $5,400 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine?The following are independent errors: a. In January 2019, repair costs of 9,000 were debited to the Machinery account. At the beginning of 2019, the book value of the machinery was 100,000. No residual value is expected, the remaining estimated life is 10 years, and straight-line depreciation is used. b. All purchases of materials for construction contracts still in progress have been immediately expensed. It is discovered that the use of these materials was 10,000 during 2018 and 12,000 during 2019. c. Depreciation on manufacturing equipment has been excluded from manufacturing costs and treated as a period expense. During 2019, 40,000 of depreciation was accounted for in that manner. Production was 15,000 units during 2019, of which 3,000 remained in inventory at the end of the year. Assume there was no inventory at the beginning of 2019. Required: Prepare journal entries for the preceding errors discovered during 2020. Ignore income taxes.Housley Paints Co. had a remaining debit balance of $25,000 in its under- and overapplied factory overhead account at year-end. The balance was deemed to be large and, therefore, should be closed to Work in Process, Finished Goods, and Cost of Goods Sold. The year-end balances of these accounts, before adjustment, showed the following: Determine the prorated amount of the underapplied factory overhead that is chargeable to each of the accounts. Prepare the journal entry to close the debit balance in Under-and Overapplied Factory Overhead.
- In janaruary, Prahbu purchased a new machine for use in the existing production line of his manufacturing business for $90,000. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $2,500 to install the machine, and after the machine is installed, he pays $1,300 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete and prahbu places the machine in service on the production line. On December 3, prahbu pays another $3,300 to perform periodic qaulity testing after the machine is placed in service. . How much will prahbu be required to capitalize as the cost of the machine.?A factory owned by Wonder Inc. was destroyed by fire. Wonder Inc. lodged an insurance claim for the value of the factory building, plant and an amount equal to one year’s net profit. During the year, there were a number of meetings with the representatives of the insurance company. Finally, before the year-end, it was decided that Wonder Inc. would receive compensation of 90% of its claim. Wonder Inc. received a letter that the settlement check for that amount had been mailed, but it was not received before year-end. How should Wonder Inc. treat this in its financial statements? Disclose the contingent asset in the footnotes. Wait until next year when the settlement check is actually received and not recognize or disclose the receivable at all since at year-end it is a contingent asset. Because the settlement of the claim was conveyed by a letter from the insurance company, that also stated that the settlement check was in the mail for 90% of the claim, record the 90% of the claim…In September Manson Paint Corporation began operations in a state that requires new employers of one or more individuals to pay a state unemployment tax of 3.5% of the first $7,000 of wages paid each employee. An analysis of the company's payroll for the year shows total wages paid of $188,480. The salaries of the president and the vice president of the company were $18,100 and $15,100, respectively, for the four-month period, but there were no other employees who received wages in excess of $7,000 for the four months. Included in the total wages were $970 paid to a director who only attended director meetings during the year, $6,130 paid to the factory superintendent, and $1,810 in employee contributions to a cafeteria plan made on a pretax basis-for both federal and state. In addition to the total wages of $188,480, a payment of $2,460 was made to Andersen Accounting Company for an audit it performed on the company's books in December. Compute the following; round your answers to the…
- A company purchased a machine at the cost of $759,600 on March 1 of year 1. On the same day, the business paid the shipping company $5,600 to deliver the machine and paid $14,500 to another business to install and test the new machine. The annual insurance policy for the new machine is $8,600. The company’s fiscal year end is November 30. The company’s accounting policy is to depreciate all machines using the double diminishing balance method. The machine has an expected useful lifespan of five-years and an estimated residual value of $30,000. However, the company discovered the machine did not meet its business requirements, so it sold the machine on September 1, year 3, for $156,500. Perform all your calculations to the nearest dollar. Show all your work. Instructions: Write you answers by hand, scan your working papers and upload to the link on the main page of the Moodle website as a PDF file. Show any calculations. Printing the problem information is permitted but only for…In September Manson Paint Corporation began operations in a state that requires new employers of one or more individuals to pay a state unemployment tax of 3.5% of the first $7,000 of wages paid each employee. An analysis of the company's payroll for the year shows total wages paid of $177,610. The salaries of the president and the vice president of the company were $20,000 and $15,000, respectively, for the four-month period, but there were no other employees who received wages in excess of $7,000 for the four months. Included in the total wages were $900 paid to a director who only attended director meetings during the year, $6,300 paid to the factory superintendent, and $2,000 in employee contributions to a cafeteria plan made on a pretax basis-for both federal and state. In addition to the total wages of $177,610, a payment of $2,430 was made to Andersen Accounting Company for an audit it performed on the company's books in December. Compute the following; round your answers to the…The City of Breneman allows employees to accrue 30 days of vacation leave. Employees receive the accrued vacation leave in pay when they terminate employment or retire. The value of the unused vacation pay was $50,000 at the beginning of the year and $40,000 at the end of the year. Of the ending balance, $15,000 was owed to employees who retired during the last month of the fiscal year, and this amount will be paid in the first month of the next fiscal year. What amount of vacation pay liability will be recorded in the general fund as of the end of the fiscal year? $10,000 $40,000 None of these $50,000 $15,000
- In September, Morrison purchased a new piece of machinery that will be used to manufacture its top selling product. The purchase price of the machine was $2,215. In addition, Morrison also paid: freight, $200; installation, $570; testing , $900; and repairs due to mishandling, $300. Ignoring the depreciation expense, at what cost should the machinery be recorded on the balance sheet?On December 31, Strike Company has decided to discard one of its batting cages. The equipment had an initial cost of $238,400 and has accumulated depreciation of $214,560. Depreciation has been recorded up to the end of the year. Which of the following will be included in the journal entry for the disposal? a. Loss on Disposal of Asset, debit, $214,560 b. Accumulated Depreciation, debit, $238,400 c. Gain on Disposal of Asset, credit, $23,840 d. Equipment, credit, $238,400A factory owned by XYZ Inc. was destroyed by fire. XYZ inc. lodged an insurance claim for the value of the factory building, plant, and an amount equal to one year’s net profit. During the year there were a number of meetings with the representatives of the insurance company. Finally, before year-end, it was decided that XYZ Inc. would receive compensation for 90% of its claim. XYZ Inc. received a letter that the settlement check for that amount has been mailed, but it was not received before year-end. How should XYZ Inc. treat this in its financial statements? Because the settlement of the claim was conveyed by a letter from the insurance company that also stated that the settlement check was in the mail for 90% of the claim, record 90% of the claim as a receivable as it is virtually certain that the contingent asset will be received. Wait until next year when the settlement check is actually received and not recognized or disclose this receivable at all since at year-end it is a…
