Problem 5) Foster Inc. purchased and put into service equipment for $300,000 on March 1, 2020. Foster also paid fees to install the equipment of $10,000. The equipment had a 10-year life and residual of $20,000. Foster records depreciation based on the month put in service. (a) What was the amount of depreciation expense was charged in 2021 if Foster uses Double Declining Balance (please note, I said 2021, not 2020)? (b) Ignore the information in part a. Foster purchases $100,000 of equipment on 1/1/2020. Foster also pays $5,000 installation costs. The book-keeper incorrectly expensed the $5,000. The life was 10 years and -0- residual. The error was discovered on 12/31/2021, after adjusting entries were made by prior to closing the books. Journal Entries Dates 1/1/20 12/31/20 12/31/21 What was done: Debit and What should have been Credit done: Debit and Credit How to fix it? (c) Foster conducts research and development on new ideas. During the year they spend $100,000 on those activities. One of the research projects (management estimates about 25% of the total cost) does result in a process that can be patented. Foster pays its lawyers fees associated with the patent $2,000. Prepare the journal entries for the $102,000 spent during the year: Journal entry(s) Debit Acct and $$ Credit Acct and $$
Problem 5) Foster Inc. purchased and put into service equipment for $300,000 on March 1, 2020. Foster also paid fees to install the equipment of $10,000. The equipment had a 10-year life and residual of $20,000. Foster records depreciation based on the month put in service. (a) What was the amount of depreciation expense was charged in 2021 if Foster uses Double Declining Balance (please note, I said 2021, not 2020)? (b) Ignore the information in part a. Foster purchases $100,000 of equipment on 1/1/2020. Foster also pays $5,000 installation costs. The book-keeper incorrectly expensed the $5,000. The life was 10 years and -0- residual. The error was discovered on 12/31/2021, after adjusting entries were made by prior to closing the books. Journal Entries Dates 1/1/20 12/31/20 12/31/21 What was done: Debit and What should have been Credit done: Debit and Credit How to fix it? (c) Foster conducts research and development on new ideas. During the year they spend $100,000 on those activities. One of the research projects (management estimates about 25% of the total cost) does result in a process that can be patented. Foster pays its lawyers fees associated with the patent $2,000. Prepare the journal entries for the $102,000 spent during the year: Journal entry(s) Debit Acct and $$ Credit Acct and $$
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 5) Foster Inc. purchased and put into service equipment for $300,000 on March 1,
2020. Foster also paid fees to install the equipment of $10,000. The equipment had a 10-year
life and residual of $20,000. Foster records depreciation based on the month put in service.
(a) What was the amount of depreciation expense was charged in 2021 if Foster uses Double
Declining Balance (please note, I said 2021, not 2020)?
(b) Ignore the information in part a. Foster purchases $100,000 of equipment on 1/1/2020. Foster also
pays $5,000 installation costs. The book-keeper incorrectly expensed the $5,000. The life was 10
years and -0- residual. The error was discovered on 12/31/2021, after adjusting entries were made
by prior to closing the books.
Journal Entries
Dates
1/1/20
12/31/20
12/31/21
What was done: Debit and What should have been
Credit
done: Debit and Credit
How to fix it?
(c) Foster conducts research and development on new ideas. During the year they spend $100,000 on
those activities. One of the research projects (management estimates about 25% of the total cost)
does result in a process that can be patented. Foster pays its lawyers fees associated with the
patent $2,000. Prepare the journal entries for the $102,000 spent during the year:
Journal entry(s)
Debit Acct and $$
Credit Acct and $$
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