McClain Company incurred the following expenditures during 2019: Apr. 9 The air conditioning system in the old manufacturing facility was replaced for $85,500. The old air conditioning system had a cost of $73,750 and a book value of $1,900. The old air conditioning system had no scrap value. June 29 Annual maintenance of $37,000 was performed. Sept. 12 The roof of the old manufacturing facility is replaced at a cost of $64,250. This expenditure substantially extended the life of the facility. Dec. 28 A new wing was added to the manufacturing facility at a cost of $265,000. This expenditure substantially increased the productive capacity of the plant. Required: 1. Prepare journal entries to record McClain’s expenditures for 2019. 2. Next Level What is the effect on the financial statements if management had improperly accounted for the: a. addition of the new wing to the manufacturing facility b. annual maintenance expenditures CHART OF ACCOUNTS McClain Company General Ledger ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Building 185 Equipment 188 Air Conditioning System (New) 189 Air Conditioning System (Old) 198 Accumulated Depreciation: Air Conditioning System (Old) 199 Accumulated Depreciation: Building LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue 881 Gain on Disposal of Property, Plant, and Equipment EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 514 Repair and Maintenance Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 893 Loss on Disposal of Property, Plant, and Equipment 910 Income Tax Expense 1. Prepare journal entries to record McClain’s expenditures for 2019. General Journal Instructions GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11

McClain Company incurred the following expenditures during 2019: Apr. 9 The air conditioning system in the old manufacturing facility was replaced for $85,500. The old air conditioning system had a cost of $73,750 and a book value of $1,900. The old air conditioning system had no scrap value. June 29 Annual maintenance of $37,000 was performed. Sept. 12 The roof of the old manufacturing facility is replaced at a cost of $64,250. This expenditure substantially extended the life of the facility. Dec. 28 A new wing was added to the manufacturing facility at a cost of $265,000. This expenditure substantially increased the productive capacity of the plant. Required: 1. Prepare journal entries to record McClain’s expenditures for 2019. 2. Next Level What is the effect on the financial statements if management had improperly accounted for the: a. addition of the new wing to the manufacturing facility b. annual maintenance expenditures CHART OF ACCOUNTS McClain Company General Ledger ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Building 185 Equipment 188 Air Conditioning System (New) 189 Air Conditioning System (Old) 198 Accumulated Depreciation: Air Conditioning System (Old) 199 Accumulated Depreciation: Building LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue 881 Gain on Disposal of Property, Plant, and Equipment EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 514 Repair and Maintenance Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 893 Loss on Disposal of Property, Plant, and Equipment 910 Income Tax Expense 1. Prepare journal entries to record McClain’s expenditures for 2019. General Journal Instructions GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11

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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Question

McClain Company incurred the following expenditures during 2019:

Apr.	9	The air conditioning system in the old manufacturing facility was replaced for $85,500. The old air conditioning system had a cost of $73,750 and a book value of $1,900. The old air conditioning system had no scrap value.
June	29	Annual maintenance of $37,000 was performed.
Sept.	12	The roof of the old manufacturing facility is replaced at a cost of $64,250. This expenditure substantially extended the life of the facility.
Dec.	28	A new wing was added to the manufacturing facility at a cost of $265,000. This expenditure substantially increased the productive capacity of the plant.

Required:

Prepare journal entries to record McClain’s expenditures for 2019.

Next Level What is the effect on the financial statements if management had improperly accounted for the:

a.	addition of the new wing to the manufacturing facility
b.	annual maintenance expenditures

CHART OF ACCOUNTS

McClain Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Building
185	Equipment
188	Air Conditioning System (New)
189	Air Conditioning System (Old)
198	Accumulated Depreciation: Air Conditioning System (Old)
199	Accumulated Depreciation: Building

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
881	Gain on Disposal of Property, Plant, and Equipment

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
514	Repair and Maintenance Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
893	Loss on Disposal of Property, Plant, and Equipment
910	Income Tax Expense

1. Prepare journal entries to record McClain’s expenditures for 2019.

General Journal Instructions

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11

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