The Kaltec Construction Company purchased apiece of machinery on June 29, 2013 for $53 000.Freight costs came to $800. It cost $1 700 toinstall and test the machinery. At this time it wasestimated that the machine would be used for sixyears and would have a residual value of $8 000at that time.Before recording the 2016 amortization expense,the owners realized that this machinery would lastonly five years, and therefore revised theamortization expense calculation.On July 2, 2017, the machine broke down andrather than repair it, the company decided to sell itfor $12 000.a) Prepare the journal entry to record thepurchase of the machine on June 29, 2013.b) Calculate the amortization charges that wouldappear on the December 2013, 2014 and 2015income statements, using the straight line methodof amortization.c) Show the journal entry for the 2013amortization.d) Show how the machine would appear in theKaltec Construction Company Balance Sheet onDecember 31, 2015, presuming the straight-linemethod of amortization is used.e) Briefly explain why no journal entry would bemade to correct previous years' records after thenew estimate in 2016 for expected life. Give oneIFRS principle to support your argument.f) Prepare the journal entry for the July 2, 2017transaction (show the calculations).

Name: The Kaltec Construction Company purchased apiece of machinery on June
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Description: The Kaltec Construction Company purchased apiece of machinery on June 29, 2013 for $53 000.Freight costs came to $800. It cost $1 700 toinstall and test the machinery. At this time it wasestimated that the machine would be used for sixyears and woul

Amortization - Amortization is an accounting method used over a certain period of time to gradually…

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The Kaltec Construction Company purchased a piece of machinery on June 29, 2013 for $53 000. Freight costs came to $800. It cost $1 700 to

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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