PRINCIPLES OF AUDITING & OTHER ASSURANC
21st Edition
ISBN: 9781264007202
Author: WHITTINGTON
Publisher: MCG
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Chapter 13, Problem 38P
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
Upon further investigation, you find the following contract dated December 1, 20X0, covering the acquisition of equipment:
Required:
Prepare in good form, including full explanations, the
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Milestone company maintains its non-current assets at cost. A provision for depreciation account is used for each type of asset. The company depreciates machinery at the rate of 15% per year while fixtures are depreciated at a rate of 10% using the reducing balance method. Depreciation is to be calculated on assets in existence at the end of each year, giving a full year’s depreciation even if the asset was bought in the course of the year. The following transactions in assets have taken place:
2018 January 1: Bought machinery €3,000, fixtures €500 2018 July 1: Bought fixtures €440
2019 October 1: Bought machinery €4,000
2019 December 1: Bought fixtures €280
The financial year end of the company is 31st December.
You are Required to show:
(a) Machinery account
(b) The fixtures account
(c) The two-separate provision for depreciation accounts
(d) What are the two most important reasons why non-currents assets are depreciated?
(e) Assuming this question required you to calculate…
On August 3, Cinco Construction purchased special-purpose equipment at a cost of $9,300,000. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $40,000.
a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention).
b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense.
c. Which of these two depreciation methods (straight-line or double-declining-balance) results in the highest net income for financial reporting purposes during the first two years of the equipment’s use?
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…
Chapter 13 Solutions
PRINCIPLES OF AUDITING & OTHER ASSURANC
Ch. 13 - Prob. 1RQCh. 13 - K-J Corporation has current assets of 5 million...Ch. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Explain the use of a system of authorizations for...Ch. 13 - Moultrie Company discovered recently that a number...Ch. 13 - Does a failure to record the retirement of...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQ
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Gibson Manufacturing Company acquired new factory...Ch. 13 - Prob. 17RQCh. 13 - Do the auditors question the service lives adopted...Ch. 13 - Prob. 19RQCh. 13 - Explain how the existence of lease agreements may...Ch. 13 - Prob. 21RQCh. 13 - Prob. 22QRACh. 13 - Prob. 23QRACh. 13 - Gruen Corporation is a large diversified company...Ch. 13 - Prob. 25QRACh. 13 - Prob. 26QRACh. 13 - Prob. 27QRACh. 13 - Prob. 28QRACh. 13 - Prob. 29QRACh. 13 - Prob. 30QRACh. 13 - Prob. 31QRACh. 13 - To assure accountability for fixed-asset...Ch. 13 - Prob. 32BOQCh. 13 - Which of the following is an internal control...Ch. 13 - Which of the following accounts should be reviewed...Ch. 13 - Prob. 32EOQCh. 13 - Prob. 32FOQCh. 13 - Which of the following statements is not typical...Ch. 13 - Prob. 32HOQCh. 13 - Prob. 32IOQCh. 13 - An effective procedure for identifying unrecorded...Ch. 13 - Which of the following is not an overall test of...Ch. 13 - Prob. 32LOQCh. 13 - Prob. 33OQCh. 13 - Analysis of which account is least likely to...Ch. 13 - Prob. 34BOQCh. 13 - Prob. 34COQCh. 13 - Prob. 34DOQCh. 13 - A search for overstated property, plant, and...Ch. 13 - The following are typical questions that might...Ch. 13 - Prob. 36PCh. 13 - Prob. 37PCh. 13 - Chem-Lite, Inc., maintains its accounts on the...Ch. 13 - Prob. 39PCh. 13 - You are reviewing the property, plant, and...
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- Adkins Bakery uses the modified half-month convention to calculate depreciation expense in the year an asset is purchased or sold. Adkins has a calendar year accounting period and uses the straight-line method to compute depreciation expense. On March 17, 2024, Adkins acquired equipment at a cost of $120,000. The equipment has a residual value of $40,000 and an estimated useful life of 3 years. What amount of depreciation expense will be recorded for the year ending December 31, 2024? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) OA. $22,222 OB. $13,333 O C. $20,000 OD. $26,667arrow_forwardOn August 3, Srini Construction purchased special-purpose equipment at a cost of $1,000,000.The useful life of the equipment was estimated to be eight years, with a residual value of $50,000.a. Compute the depreciation expense to be recognized each calendar year for financial reportingpurposes under the straight-line depreciation method (half-year convention). b. Compute the depreciation expense to be recognized each calendar year for financial report-ing purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense.c. Which of these two depreciation methods (straight-line or double-declining-balance) resultsin the highest net income for financial reporting purposes during the first two years of theequipment’s use? Explain.arrow_forwardAdkins Bakery uses the modified half-month convention to calculate depreciation expense in the year an asset is purchased or sold. Adkins has a calendar year accounting period and uses the straight-line method to compute depreciation expense. On March 17, 2018, Adkins acquired equipment at a cost of $220,000. The equipment has a residual value of $43,000 and an estimated useful life of 4 years. What amount of depreciation expense will be recorded for the year ending December 31, 2018? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) $44,250 $33,188 $36,875 $22,125arrow_forward
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