On March 31, 2021, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total purchase price of $960,000 to the various types of assets along with estimated useful lives and residual values are as follows: Estimated Useful Estimated Residual Value Life (in years) N/A Asset Cost $ 120,000 N/A Land Building Equipment Vehicles 460,000 260,000 none 25 10% of cost 6 120,000 $ 960,000 15,000 10 Total On June 29, 2022, equipment included in the March 31, 2021, purchase that cost $96,000 was sold for $76,000. Herzog uses the straight-line depreciation method for building and equipment and the double-declining-balance method for vehicles. Partial-year depreciation is calculated based on the number of months an asset is in service. Required: 1. Compute depreciation expense on the building, equipment, and vehicles for 2021. Depreciation Expense Building Equipment Vehicles 2. Prepare the journal entries to record the depreciation on the equipment sold on June 29, 2022, and the sale of equipment. a) Record the depreciation on machinery sold. b) Record the sale of machinery. 3. Compute depreciation expense on the building, remaining equipment, and vehicles for 2022. Depreciation Expense Building Equipment Vehicles
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
What are the answers to Required 1 (the
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
