During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paid the construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1, 2025. Because of technological change, Sheffield anticipates that the manufacturing facility will be useful for no more than 10 years. The local government where the facility is located required that, at the end of the 10-year period, Sheffield remediate the facility so that it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400. Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirement obligations. (a) Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Credit account titles are automatically indented when the 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. List all debit entries before credit entries. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 5,125.) Account Titles and Explanation (To record payment to contractor) (To record asset retirement obligation) Debit UO Credit
During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paid the construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1, 2025. Because of technological change, Sheffield anticipates that the manufacturing facility will be useful for no more than 10 years. The local government where the facility is located required that, at the end of the 10-year period, Sheffield remediate the facility so that it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400. Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirement obligations. (a) Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Credit account titles are automatically indented when the 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. List all debit entries before credit entries. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 5,125.) Account Titles and Explanation (To record payment to contractor) (To record asset retirement obligation) Debit UO Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paid
the construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1,
2025. Because of technological change, Sheffield anticipates that the manufacturing facility will be useful for no more than 10 years.
The local government where the facility is located required that, at the end of the 10-year period, Sheffield remediate the facility so
that it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400.
Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirement
obligations.
(a)
Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Credit
account titles are automatically indented when the 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. List all debit entries before credit entries. Round present value factor calculations to 5
decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 5,125.)
Account Titles and Explanation
(To record payment to contractor)
(To record asset retirement obligation)
Debit
Credit
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