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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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On January 1, 2019, Marshall Inc. purchased equipment for $1,000,000 that was to be used in various toxic chemical processes. The asset has a useful life of 20 years. Additionally, Marshall estimates that it will cost $100,000 to remove the asset and restore the site to a suitable use. Based on Marshall’s 10% discount rate, the present value of these future restoration costs at the time the equipment is purchased is $14,864. Prepare the entry to record the acquisition of the asset.

To determine

Journalize entry to record the acquisition of asset by Incorporation M.

Explanation

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Accounting rules for Journal entries:

  • To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
  • To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains

Prepare journal entry:

DateAccount titles and explanationDebit ($)Credit ($)

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