At the beginning of the 2025 fiscal year, an inexperienced maintenance technician at Sheffield Company did not check the oil in one ofthe company cars and the engine burned up. Sheffield replaced the engine at a cost of $8200. The material expenditure is expected toextend the useful life of the car by 3 years. The car had an original cost of $38000 and a 4-year life. The balance in AccumulatedDepreciation at the time of the expenditure was $6700. The entry to record the purchase would include aO debit to Equipment-Trucks of $1500.• debit to Accumulated Depreciation of $8200.O debit to Accumulated Depreciation of $6700,O debit to Repairs and Maintenance expense of $8200,h

The objective of the question is to determine the correct accounting entry to record the replacement…

Answered: At the beginning of the 2025 fiscal…

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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Wardell Company purchased a minicomputer on January 1, 2022, at a cost of $57,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $6,000. On January 1, 2024, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $1,200. Prepare the year-end journal entry for depreciation on December 31, 2024. Assume that the company uses the double-declining-balance method instead of the straight-line method.
Wardell Company purchased a mainframe on January 1, 2019, at a cost of $40,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $4,000. On January 1, 2021, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $900. 1. Prepare the year-end journal entry for depreciation in 2021. No depreciation was recorded during the year. 2. Prepare the year-end journal entry for depreciation in 2021. Assume that the company uses the sum-of-the-years' -digits method instead of the straight-line method.
Blue Corporation purchased a new machine for its assembly process on August 1, 2025. The cost of this machine was $169,800. The company estimated that the machine would have a salvage value of $16,800 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,000 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to O decimal places, e.g. 45,892.) (a) Straight-line depreciation for 2025 (b) (c) (d) Activity method for 2025, assuming that machine usage was 800 hours Sum-of-the-years'-digits for 2026 Double-declining-balance for 2026 GA $ GA GA $ $
On June 30, 2021, Rosetta Granite purchased equipment for $120,000. The estimated useful life of the equipment is eight years and no residual value is anticipated. An important component of the equipment is a specialized highspeed drill that will need to be replaced in four years. The $20,000 cost of the drill is included in the $120,000 cost of the equipment. Rosetta uses the straight-line depreciation method for all equipment.Required:1. Calculate depreciation for 2021 and 2022 applying the typical U.S. GAAP treatment.2. Repeat requirement 1 applying IFRS.
On January 1, 2007, Flax Co. purchased a machine for 528,000 and depreciated it by the straight-line method using an estimateduseful life of eight years with no salvage value. On January 1, 2010, Flax determined that the machine had a useful life of six years from the date of acquisition and will have a salvage value of 48,000. An accounting change was made in 2010 to reflect these additional data. The accumulated depreciation for this machine should have a balance at December 31, 2010 ofa.292,000b.308,000c.320,000d.352,000
On April 1, 2022, the KB Toy Company purchased equipment to be used in its manufacturing process. The equipment cost $59,200, has an eight-year useful life, and has no residual value. The company uses the straight-line depreciation method for all manufacturing equipment. On January 4, 2024, $16,150 was spent to repair the equipment and to add a feature that increased its operating efficiency. Of the total expenditure, $3,000 represented ordinary repairs and annual maintenance and $13,150 represented the cost of the new feature. In addition to increasing operating efficiency, the total useful life of the equipment was extended to 10 years. Required: 1. Prepare journal entries for the depreciation for 2022 and 2023. 2. Prepare journal entry for the 2024 expenditure. [Any capitalized amounts are recorded using Alternative 2-capitalization of new cost]. 3. Prepare journal entry for the depreciation for 2024.
On April 1, 2016, the KB Toy Company purchased equipment to be used in its manufacturing process. Theequipment cost $48,000, has an eight-year useful life, and has no residual value. The company uses the straightline depreciation method for all manufacturing equipment.On January 4, 2018, $12,350 was spent to repair the equipment and to add a feature that increased its operating efficiency. Of the total expenditure, $2,000 represented ordinary repairs and annual maintenance and$10,350 represented the cost of the new feature. In addition to increasing operating efficiency, the total usefullife of the equipment was extended to 10 years.Required:Prepare journal entries for the following:1. Depreciation for 2016 and 20172. The 2018 expenditure3. Depreciation for 2018
The Giovanni Company purchased a tooling machine in 2007 for $120,000. The machine was being depreciated by the straight-line method over an estimated useful life of 20 years, with no salvage value. At the beginning of 2017, after 10 years of use, Giovanni paid $20,000 to overhaul the machine. Because of this improvement, the machine's estimated useful life would be extended an additional 5 years. What would be the depreciation expense recorded for the above machine in 2017? a.$7,333 b.$4,000 c.$6,000 d.$5,333
Culver Automotive purchased equipment on October 1, 2024, at a total cost of $182,000. The machine has an estimated useful life of eight years or 100,000 hours, and an estimated residual value of $42,000. During 2024 and 2025, the machinery was used 6,300 and 14,700 hours, respectively. Calculate depreciation expense at December 31, 2024 and December 31, 2025, under the following depreciation methods: (Round answers to 0 decimal places, e.g. 5,275. and Round Depreciation cost per unit to 1 decimal places, e.g. 527.5) Straight-line depreciation Units-of-production depreciation Double diminishing-balance depreciation $ LA $ LA 2024 $ LA $ LA 2025
On January 1, 2021, Montana Enterprises purchased a $100,000 semi-trailer truck. In 2021 and 2022, Montana depreciated the truck using the straight-line method with an estimated 10 year useful life and an estimated $10,000 salvage value. At the beginning of 2023, Montana decided to adjust the initial estimates. The company now believes the truck will last a total of 15 years and have a salvage value of $17,000. At December 31, 2023, what will be the truck's adjusted book value reflecting the change in estimate? Multiple Choice O $73,000 $83,400 $85,000 $77,000
Lugar Company purchased a piece of machinery for $28,500 on January 1, 2016, and has been depreciating the machine using the sum-of-the-years'-digits method based on a five-year estimated useful life and no salvage value. On January 1, 2018, Lugar decided to switch to the straight-line method of depreciation. The salvage value is still zero and the estimated useful life is changed to a total of six years from the date of purchase. Ignore income taxes. Required:1. Prepare the appropriate journal entry, if any, to record the accounting change under GAAP.2. Prepare the journal entry to record depreciation for 2018.
Wildhorse Corporation bought a machine on June 1, 2023, for $36,600, f.o.b. the place of manufacture. Freight to the point where it was set up was $240, and $560 was expended to install it. The machine’s useful life was estimated at 10 years, with a salvage value of $2,950. On June 1, 2024, an essential part of the machine is replaced, at a cost of $2,430, with one designed to reduce the cost of operating the machine. The cost of the old part and related depreciation cannot be determined with any accuracy.On June 1, 2027, the company buys a new machine of greater capacity for $41,300, delivered, trading in the old machine which has a fair value and trade-in allowance of $23,600. Preparing the old machine for removal from the plant cost $89, and expenditures to install the new one were $1,770. It is estimated that the new machine has a useful life of 10 years, with a salvage value of $4,720 at the end of that time. (The exchange has commercial substance.)Assuming that depreciation is to…

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