Bart's Company has prepared the PP&E and depreciation schedule shown in Exhibit 8.54.1 below.The following information is available. Assume the beginning balance has been auditedThe land was purchased eight years ago when building 1 was erected. The location was then remote but now is bordered by a major freeway. The appraised value of the land is $35 million.Building 1 has an estimated useful life of 35 years and no residual value.Building 2 was built by a local contractor this year. It also has an estimated useful life of 35 years and no residual value. The company occupied it on May 1 this year.Computer A system was purchased on January 1 six years ago when the estimated useful life was eight years with no residual value. It was sold on May 1 for $500,000.Computer B system was placed in operation as soon as Computer A system was sold. It is estimated to be in use for six years with no residual value at the end.The company estimated the useful life of the press at 20 years with no residual value.Auto 1 was sold during the year for $1,000.Auto 2 was purchased on July 1. The company expects to use it for five years and then sell it for $2,000.All depreciation is calculated on the straight-line method using months of service.EXHIBIT 8.54.1 PP&E and DepreciationDescriptionAsset Cost (000s)Accumulated Depreciation (000s)Beginning BalanceAddedSoldEnding BalanceBeginning BalanceAddedSoldEnding BalanceLand$ 10,000 $ 10,000 Building 130,000 30,000$ 6,857$ 857 $ 7,714Building 2 42,000 42,000 800 800Computer A5,000 5,00003,7502083,9580Computer B 3,500 3,500 583 583Press1,500 1,500 300150 450Auto 115 15015 150Auto 2 22 22 2 2Total$ 46,515$ 45,522$ 5,015$ 87,022$ 10,922$ 2,600$ 3,973$ 9,549Required:a. Verify the depreciation calculations. Are there any errors? Put the errors in the form of an adjusting journal entry, assuming that 90 percent of the depreciation on the buildings and the press has been charged to Cost of Goods Sold and 10 percent is still capitalized in the inventory, and the other depreciation expense is classified as General and Administrative Expense (i.e., building and press depreciation is considered a product cost; inventory on hand includes 10 percent of the depreciation expense for buildings and the press: $180,700; Cost of Goods Sold contains the other 90 percent: $1,626,300).

Name: Bart's Company has prepared the PP&E and depreciation schedule shown i
Uploaded: 2024-03-05T11:50:36.000Z
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Description: Bart's Company has prepared the PP&E and depreciation schedule shown in Exhibit 8.54.1 below.The following information is available. Assume the beginning balance has been auditedThe land was purchased eight years ago when building 1 was erected. The

It is the amount of reuction in the value of a tangible fixed asset due to tear and wear, maintenance and passage of time. This expense reduces the carrying value of asset on the financial statements and provides the true value of asset. It is charged as an expense on the income statement. Different methods of calculating depreciation expense include straight-line method, double declining method, sum of year’s digits method etc.Upon verfication of the depreciation calculations, there exist two errors. They are:For Computer B, the depreciation is incorrectly determined for 12 months, whereas it should be determined only for 8 months. The correct amount of depreciation is $389,000 ($583,000 x 8/12) (Rounded). Therefore, the accumulated depreciation should be decreased with the excess depreciation charged of $194,000.For press, the depreciation was incorrectly reported with double amount. The actual depreciation expense is $75,000 ($1,500,000 / 20 years). Whereas, it was reported as $150,000. Therefore, the accumulated depreciation should be decreased with the excess depreciation charged of $75,000 ($150,000 - $75,000).Now, prepare the adjusting entry with given assumptions: DateAccount title & Explanation Debit ($) Credit ($) Accumulated depreciation 269,000($194,000 + $75,000) Cost of goods sold ($75,000 x 90%) 67,500 Inventory ($75,000 x 10%) 7,500 General and administrative expenses 194,000[To correct the errors in depreciation expense.]Adjusting entry: DateAccount title & Explanation Debit ($) Credit ($) Accumulated depreciation 269,000($194,000 + $75,000) Cost of goods sold ($75,000 x 90%) 67,500 Inventory ($75,000 x 10%) 7,500 General and administrative expenses 194,000[To correct the errors in depreciation expense.]

Answered: Bart's Company has prepared the PP&E…

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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Description	Asset Cost (000s)	Accumulated Depreciation (000s)
Land	$ 10,000			$ 10,000
Building 1	30,000			30,000	$ 6,857	$ 857		$ 7,714
Building 2		42,000		42,000		800		800
Computer A	5,000		5,000	0	3,750	208	3,958	0
Computer B		3,500		3,500		583		583
Press	1,500		1,500		300	150		450
Auto 1	15		15	0	15		15	0
Auto 2		22		22		2		2
Total	$ 46,515	$ 45,522	$ 5,015	$ 87,022	$ 10,922	$ 2,600	$ 3,973	$ 9,549

Required:

a. Verify the depreciation calculations. Are there any errors? Put the errors in the form of an adjusting journal entry, assuming that 90 percent of the depreciation on the buildings and the press has been charged to Cost of Goods Sold and 10 percent is still capitalized in the inventory, and the other depreciation expense is classified as General and Administrative Expense (i.e., building and press depreciation is considered a product cost; inventory on hand includes 10 percent of the depreciation expense for buildings and the press: $180,700; Cost of Goods Sold contains the other 90 percent: $1,626,300).

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Description	Asset Cost (000s)	Accumulated Depreciation (000s)
Beginning Balance	Added	Sold	Ending Balance	Beginning Balance	Added	Sold	Ending Balance
Land	$ 10,000			$ 10,000
Building 1	30,000			30,000	$ 6,857	$ 857		$ 7,714
Building 2		42,000		42,000		800		800
Computer A	5,000		5,000	0	3,750	208	3,958	0
Computer B		3,500		3,500		583		583
Press	1,500		1,500		300	150		450
Auto 1	15		15	0	15		15	0
Auto 2		22		22		2		2
Total	$ 46,515	$ 45,522	$ 5,015	$ 87,022	$ 10,922	$ 2,600	$ 3,973	$ 9,549