FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Waterway Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have
been recorded in 2020. The following information related to depreciation of fixed assets is provided to you.
1 Waterway purchased equipment on January 2, 2017, for $90.700. At that time, the equipment had an estimated useful life of
10 years with a $4,700 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of
additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3.100
salvage value.
2
Straight-line
During 2020, Waterway changed from the double-declining-balance method for its building to the straight-line method. The
building originally cost $320,000. It had a useful life of 10 years and a salvage value of $32,000. The following computations
present depreciation on both bases for 2018 and 2019.
3.
Declining-balance 51,200
(a)
2019
2018
$28,800 $28,800
64,000
Waterway purchased a machine on July 1, 2018, at a cost of $120,000. The machine has a salvage value of $20,000 and a
useful life of 8 years. Waterway's bookkeeper recorded straight-line depreciation in 2018 and 2019 but failed to consider the
salvage value.
Your Answer Correct Answer
1
2
Your answer is partially correct.
Prepare the journal entries to record depreciation expense for 2020 and correct any errors made to date related to the
information provided. (Ignore taxes) (Credit account titles are automatically indented when amount is entered. Do not indent manually
If no entry is required, select "No Entry for the account titles and enter O for the amounts)
No. Account Titles and Explanation
Depreciation Expense
Accumulated Depreciation Equipment
Depreciation Expense
Debit
"
15450
Credit
15450
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Transcribed Image Text:Waterway Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been recorded in 2020. The following information related to depreciation of fixed assets is provided to you. 1 Waterway purchased equipment on January 2, 2017, for $90.700. At that time, the equipment had an estimated useful life of 10 years with a $4,700 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3.100 salvage value. 2 Straight-line During 2020, Waterway changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $320,000. It had a useful life of 10 years and a salvage value of $32,000. The following computations present depreciation on both bases for 2018 and 2019. 3. Declining-balance 51,200 (a) 2019 2018 $28,800 $28,800 64,000 Waterway purchased a machine on July 1, 2018, at a cost of $120,000. The machine has a salvage value of $20,000 and a useful life of 8 years. Waterway's bookkeeper recorded straight-line depreciation in 2018 and 2019 but failed to consider the salvage value. Your Answer Correct Answer 1 2 Your answer is partially correct. Prepare the journal entries to record depreciation expense for 2020 and correct any errors made to date related to the information provided. (Ignore taxes) (Credit account titles are automatically indented when amount is entered. Do not indent manually If no entry is required, select "No Entry for the account titles and enter O for the amounts) No. Account Titles and Explanation Depreciation Expense Accumulated Depreciation Equipment Depreciation Expense Debit " 15450 Credit 15450
(b)
2018
2019
Depreciation
taken
$7,500
15,000
List of Accounts
$22,500
Net income
Depreciation expense
eTextbook and Media
Save for Later
Depreciation that
should be taken
List of Accounts
$6,250
Income before depreciation expense $
12.500
$18,750
Show comparative net income for 2019 and 2020. Income before depreciation expense was $330,000 in 2020, and was
$340,000 in 2019. (Ignore taxes)
Differences
$
$1,250
WATERWAY COMPANY
Comparative Income Statements
For the Years 2020 and 2019
2,500
$3,750
2020
A
$
Attempts: 3 of 3 used
2019
Attempts: 0 of 3 used
Submit Answer
expand button
Transcribed Image Text:(b) 2018 2019 Depreciation taken $7,500 15,000 List of Accounts $22,500 Net income Depreciation expense eTextbook and Media Save for Later Depreciation that should be taken List of Accounts $6,250 Income before depreciation expense $ 12.500 $18,750 Show comparative net income for 2019 and 2020. Income before depreciation expense was $330,000 in 2020, and was $340,000 in 2019. (Ignore taxes) Differences $ $1,250 WATERWAY COMPANY Comparative Income Statements For the Years 2020 and 2019 2,500 $3,750 2020 A $ Attempts: 3 of 3 used 2019 Attempts: 0 of 3 used Submit Answer
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