AEach of the following situations is independent:BCDFGHKLMNR.UVXY121. Change in estimated useful life and residualvalue. Company XYZ purchases equipment on 1 January 20x6 for34$42,000 The company uses the straight line method of depreciation, taking a full year's depreciation in the year5 of acquisition. The equipment has an estimated residual value of$8,000.00 and an estimated useful life of4 years. In 20x7, the company decides that the machine really has an origional total life of5 years and7 a residual value of$ 7,000.0089How much is the depreciation expense for 20x7?1011 Solution:12131415161718 2. Retrospective change in accounting policy. A private company changes its method of accounting for long term19 construction contracts from the percentage of completion method (PC) to the compelted contract method (CC) in 20x7.20 The years affected by the change, and incomes under both methods, appear below (ignore income tax)2122 Year23 20x524 20x625 20x7PC$450 $2252751606507502627 If the financial statements for 20x6 and 20x7 are shown comparatively, what is the amount of the accounting policy adjustments to the 1 January28 balance of retained earnings for 20x6 and 20x7?2930 Solution:3132Activate Windows3334Go tol Settings to activate WAVindows|Instructions Part 1Dart 2Part 3 E102fixBDGHKMPRVY3738 3. Error correction and retrospective adjustment. A company purchases a delivery truck for39 They expect to use the truck for only40 straight line depreciation with a full year of depreciation taken in the first year, but neglects to record any depreciation in 20x6. Rather41 the accountant charges the entire cost to delivery expense in 20x6. The company's controller discovers the error in late 20x7.$17,000 on 1 January 20x6.3 years and then sell it for$8,500 The accountant is instructed to use4243 Provide the 20x7 entries to record depreciation and the error correction, and indicate the amounts of the cumulative retrospective adjsutment to opening44 retained earnings appearing in the 20x6 and 20x7 comparative retained statements. Ignore income tax.4546 Solution:474849505152535455565758 4. Error correction, retrospective adjustment, and compartive statements. On 1 July 20x7, a full year's insurance of59 1 July 20x7 through 30 June 20x8, was paid and debited to insurance expense. Assume:* the company uses a claendar fiscal year* Retained earnings at 1 January 20x7 is62 *No adjusting entry for insurance is made on 31 December 20x763 *Reported earnings for 20x7 (in error) is64 * Earnings for 20x8 is65 * Earnings for 20x9 is66 * there is no income tax$4,200 covering the period6061$30,000$33,900$$35,000(assuming that the error has not been discovered)42,0006768 List the effect of the error on relevant accounts, and earnings, in 20x7 and 20x869 Prepare the entry to record the error if it was discovered in 20x770 Prepare the entry to record the error if it was discovered in 20x8, and prepare the 20x7 and 20x8 comparative retained earnings statements. The amount is deemed material.Activate WindowsGo to Settings to activate WindowsInstructionsPart 1Part 2Part 3RoaduY Accorcihilitur Good to go

Name: AEach of the following situations is independent:BCDFGHKLMNR.UVXY121.
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Description: AEach of the following situations is independent:BCDFGHKLMNR.UVXY121. Change in estimated useful life and residualvalue. Company XYZ purchases equipment on 1 January 20x6 for34$42,000 The company uses the straight line method of depreciation, taking

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1. Change in estimated useful life and residual value. Company XYZ purchases equipment on 1 January 20x6 for $ 42,000 The company uses the straight line method of depreciation, taking a full year's depreciation in the year of acquisition. The equipment has an estimated residual value of $8,000.00 and an estimated useful life of 4 years. In 20x7, the company decides that the machine really has an origional total life of 5 years and a residual value of $ 7,000.00 How much is the depreciation expense for 20x7? Solution:

1. Change in estimated useful life and residual value. Company XYZ purchases equipment on 1 January 20x6 for $ 42,000 The company uses the straight line method of depreciation, taking a full year's depreciation in the year of acquisition. The equipment has an estimated residual value of $8,000.00 and an estimated useful life of 4 years. In 20x7, the company decides that the machine really has an origional total life of 5 years and a residual value of $ 7,000.00 How much is the depreciation expense for 20x7? Solution:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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