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Prepare the journal entry for this transaction, assuming Evan uses the cost method.

Prepare the journal entry for this transaction, assuming Evan uses the cost method.

FINANCIAL ACCOUNTING
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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2. Replacement Parts 
Evan's Greenhouses paid    $58,000    to replace the cooling/heating system in 10 of his 40 greenhouses. The
original cooling/heating systems were capitalized as part of the greenhouses when they were purchased
5 years ago, and they were not considered a separate component. When purchased, the greenhouses
were depreciated using straight line depreciation with an assumption of a 20 year life and no residual value.
Evan estimated that the original cost of the cooling/heating system would have been 30% cheaper than they
cost on the day they were replaced (due to inflation).
Prepare the journal entry for this transaction, assuming Evan uses the cost method.

Chapter 10 Homework 1. Asset Purchase Penny's Brilliant Bakery makes all sorts of breads for sale to the public. Business is booming and Penny is looking to expand the operation. She has purchased a new state-of-the art rotary oven in which she can bake 100 $196,000 loaves of bread at a time. Oona purchased the oven on November 1, 2021 from Rick's Appliances for with terms of 2/10, n/30. The oven was delivered on November 3, 2021, and that same day Penny paid the freight bill of $4,936 . Penny hired an electrician to hook up the oven, which cost her $5,235 which she paid in full on November 5, 2021. The new oven looked so sparkly, that Penny decided to pay a cleaning company to do a deep clean on the front and back of all her other appliances to make them just as brilliant. This cost her $1,367 which she paid on November 10, 2021. Finally, Penny paid Rick's Appliances the amount she owed to them on November 11, 2021. Prepare all the journal entries for November as described above. Penny uses the gross method for discounts. 2. Replacement Parts Evan's Greenhouses paid $58,000 to replace the cooling/heating system in 10 of his 40 greenhouses. The original cooling/heating systems were capitalized as part of the greenhouses when they were purchased 5 years ago, and they were not considered a separate component. When purchased, the greenhouses were depreciated using straight line depreciation with an assumption of a 20 year life and no residual value. Evan estimated that the original cost of the cooling/heating system would have been 30% cheaper than they cost on the day they were replaced (due to inflation). Prepare the journal entry for this transaction, assuming Evan uses the cost method. 3. Donated Assets Brandon's Animal Rescue purchased a green energy system for their animal shelter/hospital. The equipment , has an estimated life of 40 years, and zero residual value. The provincial cost a total of $199,000 government has offered incentives for converting to green energy, and the grant will cover 67% of the asset cost. Brandon's Animal Rescue purchased the equipment on April 15, 2021 and they received the grant on May 20, 2021. Brandon's Animal Rescue accounts for government grants using the deferral method. Prepare the journal entries for the two transactions above.
Transcribed Image Text:Chapter 10 Homework 1. Asset Purchase Penny's Brilliant Bakery makes all sorts of breads for sale to the public. Business is booming and Penny is looking to expand the operation. She has purchased a new state-of-the art rotary oven in which she can bake 100 $196,000 loaves of bread at a time. Oona purchased the oven on November 1, 2021 from Rick's Appliances for with terms of 2/10, n/30. The oven was delivered on November 3, 2021, and that same day Penny paid the freight bill of $4,936 . Penny hired an electrician to hook up the oven, which cost her $5,235 which she paid in full on November 5, 2021. The new oven looked so sparkly, that Penny decided to pay a cleaning company to do a deep clean on the front and back of all her other appliances to make them just as brilliant. This cost her $1,367 which she paid on November 10, 2021. Finally, Penny paid Rick's Appliances the amount she owed to them on November 11, 2021. Prepare all the journal entries for November as described above. Penny uses the gross method for discounts. 2. Replacement Parts Evan's Greenhouses paid $58,000 to replace the cooling/heating system in 10 of his 40 greenhouses. The original cooling/heating systems were capitalized as part of the greenhouses when they were purchased 5 years ago, and they were not considered a separate component. When purchased, the greenhouses were depreciated using straight line depreciation with an assumption of a 20 year life and no residual value. Evan estimated that the original cost of the cooling/heating system would have been 30% cheaper than they cost on the day they were replaced (due to inflation). Prepare the journal entry for this transaction, assuming Evan uses the cost method. 3. Donated Assets Brandon's Animal Rescue purchased a green energy system for their animal shelter/hospital. The equipment , has an estimated life of 40 years, and zero residual value. The provincial cost a total of $199,000 government has offered incentives for converting to green energy, and the grant will cover 67% of the asset cost. Brandon's Animal Rescue purchased the equipment on April 15, 2021 and they received the grant on May 20, 2021. Brandon's Animal Rescue accounts for government grants using the deferral method. Prepare the journal entries for the two transactions above.
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