Error corrections; investment
• LO20–6
Required:
1. Prepare the
2. Prepare the journal entry to correct the error assuming it is not discovered until early 2019. (Ignore income taxes.)
Wilkins Food Products Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2016. In payment for the machine Wilkins issued a three-year installment note to be paid in three equal payments at the end of each year. The payments include interest at the rate of 10%. Lawrence made a conceptual error in preparing the amortization schedule, which Wilkins failed to discover until 2018. As a result of the error, Wilkins understated interest expense by $45,000 in 2016 and $40,000 in 2017.
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INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
- Which of the following is a qualifying asset? Biological asset measured at fair value less costs to sell A multi-million dollar executive jet plane that is ready for its intended use upon purchase A second-hand heavy machinery that takes 2 years to refurbish and customize for its intended use A long-term note receivable (financial asset)arrow_forwardQ.The Kuhl Brothers ask you whether they should buy the new machine. To help in your analysis, calculate the following: 1. One-time after-tax cash effect of disposing of the old machine on January 1, 2017arrow_forwardModified Accelerated Cost Recovery System (MACRS) (LO 8.2) Calculate the following: Click here to access the various depreciation tables. If required, round your final answers to the nearest dollar. If your answer is zero, enter "0". c. The first year of depreciation on a computer costing $2,800 purchased in May 2020, using the half-year convention and straight-line depreciation with no bonus depreciation.$fill in the blank dfbf18f8d052045_1 d. The third year of depreciation on business furniture costing $10,000 purchased in March 2018, using the half-year convention and accelerated depreciation but no bonus depreciation.$fill in the blank f2779406dfe8021_1arrow_forward
- On January 1, 2025, Waterway Company rearranged its production line to improve efficiency resulting in greater productivity. The costs to rearrange the plant layout amounted to $129000 and the costs to reinstall some of the machinery components were $82000. What amount of these costs should be capitalized? A. $82000 B. $211000 C. $129000 D. $0arrow_forwardExercise 7-27 (Algorithmic) (LO. 5) Sandstorm Corporation decides to develop a new line of paints. The project begins in 2023 in the U.S. Sandstorm incurs the following expenses in 2023 in connection with the project: Salaries Materials Depreciation on equipment The benefits from the project will be realized starting in July 2024. If an amount is zero, enter "0". Sandstorm Corporation capitalizes and amortizes its research and experimental expenditures. What are its related deductions in 2023 and 2024? 2023: $104,400 31,320 15,660 2024: 0 X 15,138 Xarrow_forwardModified Accelerated Cost Recovery System (MACRS) (LO 8.2) Calculate the following: Click here to access the various depreciation tables. If required, round your final answers to the nearest dollar. If your answer is zero, enter "0" b. The second year (2021) of depreciation on a computer that cost $5,000 purchased in May 2020, using the half-year convention and accelerated depreciation considering any bonus depreciation taken.$fill in the blank 41b92bfaafa5018_1 c. The first year of depreciation on a computer costing $2,800 purchased in May 2020, using the half-year convention and straight-line depreciation with no bonus depreciation.$fill in the blank dfbf18f8d052045_1arrow_forward
- Modified Accelerated Cost Recovery System (MACRS) (LO 8.2) Calculate the following: Click here to access the various depreciation tables. If required, round your final answers to the nearest dollar. If your answer is zero, enter "0". The first year of depreciation on a office building that cost $250,000 purchased June 2, 2022. 4,168 X b. The second year (2023) of depreciation on a computer that cost $5,000 purchased in May 2022, using the half-year convention and accelerated depreciation considering any bonus depreciation taken Ov a. The first year of depreciation on a computer costing $2,800 purchased in May 2022, using the half-year convention and straight-line depreciation with no bonus depreciation 280 b. The third year of depreciation on business furniture costing $10,000 purchased in March 2020, using the half-year convention and accelerated depreciation but no bonus depreciation. 1,748 xarrow_forwardOPPO A9 2020 2021/01/04 08:53 I give you too much pressure to pay your, IUal ecause the new branch may not have generated enough cash flow within the year to cover the PHP8 million. WHAT'S NEW B. Activity #1. Decide the following scenarios whether long-term or short-term financing is needed. (long-term loan, short-term loan) Need/Activity 1. Acquisition of equipment 2. Franchise of a fast-food outlet 3. Purchase of inventory for a clothing shop 4. Loan for agricultural needs (i.e. palay production, mango, etc.) 5. Loan for purchase of a commercial space 6. Development of a subdivision 7. Auto-loan 8. Loan for sari-sari store supplies 9. Housing Loan 10. Emergency loans (advances) WHAT IS ITarrow_forward8. Analysis of a replacement project Aa Aa At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Johnson Co. is considering replacing an existing piece of equipment. The project involves the following: The new equipment will have a cost of $1,800,000, and it will be depreciated on a straight-line basis over a period of six years (years 1-6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. Replacing the old machine will require an investment in net working capital (NWC) of $60,000 that will be…arrow_forward
- [LO 11-3] 11-26 Make versus Buy; Continuation of Exercise 9-22 (Chapter 9) Vista Company manufac- tures electronic equipment. In 2021, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2 per switch. As an alternative, Vista's CEO considered purchasing either machine A or machine B so the company could manufacture its own switches. The CEO decided at the beginning of 2022 to purchase machine A, based on the following data: Annual fixed cost (depreciation) Variable cost per switch Machine A $135,000 0.65 Machine B $204,000 0.30 Required 1. Assume that machine A has not yet been purchased. What is the annual volume (rounded up to nearest whole number) that would make the company indifferent between the two decision alternatives (i.e., purchasing and then using machine A to make the switches versus purchasing the switches from the outside vendor)? 2. Assume that machine A has already been purchased. Is it preferable to use…arrow_forwardrice e new m al for $2 $5000 ted to ir ue) at e inflo com uipm $18 the ate met estm flov Q.2: The Electrical Industries Company is considering the replacement of its old machines with new machines. The historical cost of old machines is $940000, book value of $86400 and market value $129600, The new machine price is $1296000 and it is expected to have a useful life of five years, with a disposal value of $144800) Custom fees, transporting cost and installing cost of new machines are $68800. Additional working capital is needed to keep the new machine running efficiently for $190320. The new machines will generate an annual cash flow before tax for $432000. The profits are subjected to income tax at rate %40. The company uses the straight-line method in calculating depreciation and the interest rate is %8. Required: calculate the following: 1. Initial cost of investment 2. Net cash inflow for new machines. 3. Net present value 4. Accounting rate of return (ARR) based on cost of…arrow_forwardPA9. LO 11.4 For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years. B. A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.arrow_forward