The Horstmeyer Corporation commenced operations early in 2024. A number of expenditures were made during 2024 that were debited to one account called intangible asset. A recap of the $246,000 balance in this account at the end of 2024 is as follows: Date February 3 March 1 March 15 April 30 June 15 September 30 October 13. Various Transaction State incorporation fees and legal costs related to organizing the corporation Fire insurance premium for three-year period Purchased a copyright Research and development costs Legal fees for filing a patent on a new product resulting from an R&D project Legal fee for successful defense of patent developed above Entered into a 10-year franchise agreement with franchisor Advertising costs Total Amount $ 9,000 7,000 39,000 59,000 7,000 31,000 59,000 35,000 $ 246,000 Required: Prepare the necessary journal entry to clear the intangible asset account and to set up accounts for separate intangible assets, other types of assets, and expenses indicated by the transactions. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

The Horstmeyer Corporation commenced operations early in 2024. A number of expenditures were made during 2024 that were debited to one account called intangible asset. A recap of the $246,000 balance in this account at the end of 2024 is as follows: Date February 3 March 1 March 15 April 30 June 15 September 30 October 13. Various Transaction State incorporation fees and legal costs related to organizing the corporation Fire insurance premium for three-year period Purchased a copyright Research and development costs Legal fees for filing a patent on a new product resulting from an R&D project Legal fee for successful defense of patent developed above Entered into a 10-year franchise agreement with franchisor Advertising costs Total Amount $ 9,000 7,000 39,000 59,000 7,000 31,000 59,000 35,000 $ 246,000 Required: Prepare the necessary journal entry to clear the intangible asset account and to set up accounts for separate intangible assets, other types of assets, and expenses indicated by the transactions. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter17: Business Tax Credits And The Alternative Minimum Tax

Section: Chapter Questions

Problem 11P

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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.
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.
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