Patrick Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2020: Prepaid Rent $12,000, Goodwill $50,000, Franchise Fees Receivable $2,000, Franchises $47,000, Patents $33,000, and Trademarks $10,000. Prepare the intangible assets section of the balance sheet.
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- 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.Dinnell Company owns the following assets: In the year of acquisition and retirement of an asset, Dinnell records depreciation expense for one-half year. During 2020, Asset A was sold for 7,000. Required: Prepare the journal entries to record depreciation on each asset for 2017 through 2020 and the sale of Asset A. Round all answers to the nearest dollar.On December 31, 2019, Vail Company owned the following assets: Vail computes depreciation and amortization expense to the nearest whole year. During 2020, Vail engaged in the following transactions: Required: 1. Check the accuracy of the accumulated depreciation balances at December 31, 2019. Round to the nearest whole dollar in all requirements. 2. Prepare journal entries to record the preceding events in 2020, as well as the year-end recording of depreciation expense. 3. Prepare an Accumulated Depreciation account for each category of assets, enter the beginning balance, post the journal entries from Requirement 2, and compute the ending balance.
- 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.On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.Koolman Construction Company began work on a contract in 2019. The contract price is 3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows: Required: 1. Compute the gross profit or loss recognized in 2019 and 2020. 2. Prepare the appropriate sections of the income statement and ending balance sheet for each year.
- Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.On July 1, 2018, Mundo Corporation purchased factory equipment for 50,000. Residual value was estimated at 2,000. The equipment will be depreciated over 10 years using the double-declining balance method. Counting the year of acquisition as one-half year, Mundo should record 2019 depredation expense of: a. 7,680 b. 9,000 c. 9,600 d. 10,000Jada Company had the following transactions during the year: Purchased a machine for $500,000 using a long-term note to finance it Paid $500 for ordinary repair Purchased a patent for $45,000 cash Paid $200,000 cash for addition to an existing building Paid $60,000 for monthly salaries Paid $250 for routine maintenance on equipment Paid $10,000 for major repairs Depreciation expense recorded for the year is $25,000 If all transactions were recorded properly, what is the amount of increase to the Property, Plant, and Equipment section of Jadas balance sheet resulting from this years transactions? What amount did Jada report on the income statement for expenses for the year?
- During 2019, White Company determined that machinery previously depreciated over a 7-year life had a total estimated useful life of only 5 years. An accounting change was made in 2019 to reflect the change in estimate. If the change had been made in 2018, accumulated depreciation at December 31, 2018, would have been 1,600,000 instead of 1,200,000. As a result of this change, the 2019 depreciation expense was 100,000 greater than it would have been if no change were made. Ignoring income tax considerations, what is the proper amount of the adjustment to Whites January 1, 2019, balance of retained earnings? a. 0 b. 100,000 c. 280,000 d. 400,000At 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.Investing Activities and Depreciable Assets Verlando Company had the following account balances and information available for 2019: During 2019, Verlando recorded the following transactions affecting these accounts: a. Land with a carrying value of 35,000 was sold at a loss of 6,000. b. Land and equipment were purchased with cash during the period. c. Equipment with an original cost of 20,000 that had a book value of 4,000 was written off as obsolete. d. A building with an original cost of 60,000 and accumulated depreciation of 25,000 was sold at a 23,000 gain. e. Depreciation expense and amortization expense were recorded. f. Net income for the year was 60,000. g. A patent was acquired during the year in exchange for 1,200 shares of common stock with a par value of 1 per share and a market value of 26 per share. h. Additional marketable securities wefe purchased during the year. i. Verlando Company has no notes payable in the liabilities section of its balance sheet. Required: 1. Next Level Assuming that Verlando uses the indirect method to determine operating cash flows, what is the amount of depreciation expense and amortization expense that would be added back to net income: 2. Prepare the investing activities section of the statement of cash flows for the year ended December 31, 2019. 3. Prepare the disclosure for significant noncash transactions for the statement of cash flows for the year ended December 31, 2019.
