Concept explainers
Enter the adjusting
Explanation of Solution
Adjusted entry:
At the end of the financial year, the management of the company is required to make journal entries to reflect that the financial statement of the company is prepared as per the accrual concept.
Enter the adjusting journal entries of Company H for the year-end December 31, 20X6:
Date | Accounts title & explanation | Post ref. | Debit | Credit |
1 | Profit on the construction of the building | $1,500 | ||
$317 | ||||
| $317 | |||
Building | $1,500 | |||
(being the addition to building and correction to depreciation is recorded) | ||||
2 | Land improvements | $5,000 | ||
Depreciation expenses | $250 | |||
Accumulated depreciation | $250 | |||
Land | $5,000 | |||
(being rectification of the paving and fencing expenses is recorded) | ||||
3 | Accumulated depreciation | $20,300 | ||
Loss on sale of machine | $2,800 | |||
Machine & equipment | $22,000 | |||
Depreciation expenses | $1,100 | |||
(being the rectification of the disposal of the asset and depreciation is recorded) | ||||
4 | Land | $100,000 | ||
Building | $400,000 | |||
Depreciation | $8,000 | |||
Paid-in-capital (donated assets) | $500,000 | |||
Accumulated depreciation | $8,000 | |||
(being the increased value of the land and depreciation is recorded |
Table: (1)
Working note 1:
Calculation of the profit on the construction of the building for case 1:
Working note 2:
Calculate the depreciation expenses for case 1:
Particulars | Amount |
Actual depreciation | $667 |
Recorded depreciation | $350 |
Difference | $317 |
Table: (2)
Working note 3:
Calculate the actual depreciation and recorded depreciation for case 1:
Working note 4:
Calculate the recorded depreciation for case 1:
Working note 5:
Calculate the depreciation on land for case 2:
Working note 6:
Calculate the loss on sale for case 3:
Particulars | Amount |
Machinery cost | $48,000 |
Less: Accumulated depreciation: | |
20X5 | $16,800 |
20X6 | $2,400 |
Unrecorded depreciation cost | $28,800 |
Less: Proceeds from sales | $26,000 |
Loss of sales | $2,800 |
Table: (3)
Working note 7:
Calculate the depreciation for case 4:
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Chapter 13 Solutions
PRIN OF AUDITING AND ASSURANCE LL W/CONN
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