Chem-Lite, Inc., maintains its accounts on the basis of a fiscal year ending March 31. At March 31, 20X1, the Equipment account in the general ledger appeared as shown below. The company uses straight-line depreciation, a 10-year life, and 10 percent salvage value for all its equipment. It is the company’s policy to take a full year’s depreciation on all additions to equipment occurring during the fiscal year, and you may treat this policy as a satisfactory one for the purpose of this problem. The company has recorded depreciation for the fiscal year ended March 31, 20X1. Equipment 4/1/X0 Bal. forward 170,000 12/1/X0 11,200 1/2/X1 1,074 2/1/X1 1,074 3/1/X1 1,074 Upon further investigation, you find the following contract dated December 1, 20X0, covering the acquisition of equipment: List price $ 44,000 5% sales tax 2,200 Total $ 46,200 Down payment 11,200 Balance 35,000 9% interest, 24 months 6,300 Contract amount $ 41,300 Required: Prepare the adjusting entries you would propose as auditor of Chem-Lite, Inc., with respect to the equipment and related depreciation accounts at March 31, 20X1. (Assume that all amounts given are material.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate computations to the nearest whole dollar value.) Record the entry to correct the entries to the Equipment account for the payments on the installment contract originating on December 1, 20X0. Record the entry to correct the depreciation taken the equipment purchased under the installment contract originating on December 1, 20X0.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Chem-Lite, Inc., maintains its accounts on the basis of a fiscal year ending March 31. At March 31, 20X1, the Equipment account in the general ledger appeared as shown below. The company uses straight-line depreciation, a 10-year life, and 10 percent salvage value for all its equipment. It is the company’s policy to take a full year’s depreciation on all additions to equipment occurring during the fiscal year, and you may treat this policy as a satisfactory one for the purpose of this problem. The company has recorded depreciation for the fiscal year ended March 31, 20X1. Equipment 4/1/X0 Bal. forward 170,000 12/1/X0 11,200 1/2/X1 1,074 2/1/X1 1,074 3/1/X1 1,074 Upon further investigation, you find the following contract dated December 1, 20X0, covering the acquisition of equipment: List price $ 44,000 5% sales tax 2,200 Total $ 46,200 Down payment 11,200 Balance 35,000 9% interest, 24 months 6,300 Contract amount $ 41,300

Required:

Prepare the adjusting entries you would propose as auditor of Chem-Lite, Inc., with respect to the equipment and related depreciation accounts at March 31, 20X1. (Assume that all amounts given are material.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate computations to the nearest whole dollar value.)

Record the entry to correct the entries to the Equipment account for the payments on the installment contract originating on December 1, 20X0.

Record the entry to correct the depreciation taken the equipment purchased under the installment contract originating on December 1, 20X0.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Accounting for Property, Plant and Equipment
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education