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- Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2019. Gross receipts were 300,000. The following expenses were incurred and paid as indicated: Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 810, 2020. a. Calculate Ducks net income from the concert for tax purposes for 2019. b. Using the present value tables in Appendix H, what is the true cost to Duck if it had to defer the 100,000 deduction for the performers until 2020? Assume a 5% discount rate and a 21% marginal tax rate in 2019 and 2020.On January 1, 2019, Uptown Builders purchased a machine for $200,000. Uptown's policy is to depreciate this type of machinery using straight-line depreciation, over five years, with no residual value. Because of a bookkeeping error, no depreciation was recognized in Uptown's 2019 or 2020 financial statements. The error was discovered during the preparation of the 2021 financial statements. Ignoring income taxes, the impact of this error on retained earnings prior to any 2021 adjustments is: Question 8 options: Overstatement of $80,000 Understatement of $120,000 Understatement of $80,000 Overstatement of $120,000Walsh Inc. is a privately held company with an August 31st fiscal year end. Walsh’s operations include operating a local brewery. Walsh believes that an impairment loss on some of the older water tanks it owns needs to be recorded as a significant adverse change in the extent or manner in which [the water tank] is being used has occurred. The historical cost of the water tanks is $4,000,000 and as of the end of the fiscal year (August 31, 2021) $2,500,000 in depreciation on the water tanks has been recorded. Furthermore, as this date, Walsh estimates that the expected future cash flows (undiscounted) from the use and eventual disposition of the water tanks is $1,250,000. The fair value of the water tanks is estimated to be $975,000 at that time. Accounting Issue: Is there an impairment loss that Walsh needs to recognize on the water tanks? If so, what is the correct amount of the impairment loss on the water tanks as of August 31st, 2021?
- Mawn Company bought and and built a warehouse during 2019. It improperly debited the following related costs to an account titled Land and Buildings: Prepare the correcting entries on December 31, 2019, to properly reclassify the preceding items.On November 4, 2019, Blue Company acquired an asset (27.5-year residential real property) for $200,000 for use in its business. In 2019 and 2020, respectively, Blue deducted $642 and $5,128 of cost recovery. These amounts were incorrect; Blue applied the wrong percentages (i.c., those for 39 year rather than 27.5 year assets). Blue should have taken $910 and $7,272 cost recovery in 2019 and 2020, respectively. On January 1, 2021, the asset was sold for $180,000. If required, round all computations to the nearest dollar. Click here to access the depreciation tables in the textbook. a. The adjusted basis of the asset at the end of 2020 is $ b. The cost recovery deduction for 2021 is $ c. The loss on the sale of the asset in 2021 isMcClain Company incurred the following expenditures during 2019: Apr. June Sept. Dec. 9 The air conditioning system in the old manufacturing facility was replaced for $80,000. The old air conditioning system had a cost of $71,750 and a book value of $1,700. The old air conditioning system had no scrap value. 29 Annual maintenance of $39,500 was performed. 12 The roof of the old manufacturing facility is replaced at a cost of $68,000. This expenditure substantially extended the life of the facility. 28 A new wing was added to the manufacturing facility at a cost of $261,000. 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
- On April 1, 2025, Skysong Company received a condemnation award of $481,600 cash as compensation for the forced sale of the company's land and building, which stood in the path of a new state highway. The land and building cost $67,200 and $313,600, respectively, when they were acquired. At April 1, 2025, the accumulated depreciation relating to the building amounted to $179,200. On August 1, 2025, Skysong purchased a piece of replacement property for cash. The new land cost $100,800, and the new building cost $448,000. Prepare the journal entries to record the transactions on April 1 and August 1, 2025. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when 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.) Date Account Titles and Explanation Debit TING CreditOn March 31, 2021, Susquehanna Insurance purchased an office building for $10,200,000. Based on their relative fair values, one-third of the purchase price was allocated to the land and two-thirds to the building. Furniture and fixtures were purchased separately from office equipment on the same date for $1,300,000 and $800,000, respectively. The company uses the straight-line method to depreciate its buildings and the double-declining-balance method to depreciate all other depreciable assets. The estimated useful lives and residual values of these assets are as follows: ServiceLife ResidualValue Building 25 5% of cost Furniture and fixtures 10 5% of cost Office equipment 5 $40,000 Required:Calculate depreciation for 2021 and 2022.McClain Company incurred the following expenditures during 2019: Apr. 9 The air conditioning system in the old manufacturing facility was replaced for $80,000. The old air conditioning system had a cost of $71,750 and a book value of $1,700. The old air conditioning system had no scrap value. June 29 Annual maintenance of $39,500 was performed. Sept. 12 The roof of the old manufacturing facility is replaced at a cost of $68,000. This expenditure substantially extended the life of the facility. Dec. 28 A new wing was added to the manufacturing facility at a cost of $261,000. 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
- On January 2, 2018, McKnight Furniture purchased display shelving for $8,000 cash, expecting the shelving to remain in service for five years. McKnight depreciated the shelving on a double-declining-balance basis, with $1,500 estimated residual value. On September 30, 2019, the company sold the shelving for $2,400 cash. Record both the depreciation expense on the shelving for 2019 and its sale in September. Also show how to compute the gain or loss on the disposal of the shelving.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…Burnitz Manufacturing Company was organized on January 1, 2020. During 2020, it has used in its reports to management the straight-line method of depreciating its plant assets. On November 8, you are having a conference with Burnitz’s officers to discuss the depreciation method to be used for income tax and stockholder reporting. James Bryant, president of Burnitz, has suggested the use of a new method, which he feels is more suitable than the straight-line method for the needs of the company during the period of rapid expansion of production and capacity that he foresees. Following is an example in which the proposed method is applied to a fixed asset with an original cost of $248,000, an estimated useful life of 5 years, and a salvage value of approximately $8,000. Year Au Years of Life Used Au Fraction Rate Au Depreciation Expense Au Accumulated Depreciation at End of Year Au Book Value at End of Year 1 Au 1 Au 1/15 Au $16,000 Au $ 16,000 Au $232,000 2 Au 2 Au 2/15 Au…