Whispering Co. had a sheet metal cutter that cost $100,000 on January 5, 2021. This old cutter had an estimated life of ten years and a salvage value of $17,000. On April 3, 2026, the old cutter is exchanged for a new cutter with a fair value of $60,000. The exchange lacked commercial substance. Whispering also received $15,000 cash. Assume that the last fiscal period ended on December 31, 2025, and that straight-line depreciation is used. (b) Prepare all entries that are necessary on April 3, 2026. (Credit account titles are automatically indented when the 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. Record journal entries in the order presented in the problem.) Account Titles and Explanation Debit Credit Cost of Goods Sold (To record depreciation.) (To record exchange of machineries.)

Whispering Co. had a sheet metal cutter that cost $100,000 on January 5, 2021. This old cutter had an estimated life of ten years and a salvage value of $17,000. On April 3, 2026, the old cutter is exchanged for a new cutter with a fair value of $60,000. The exchange lacked commercial substance. Whispering also received $15,000 cash. Assume that the last fiscal period ended on December 31, 2025, and that straight-line depreciation is used. (b) Prepare all entries that are necessary on April 3, 2026. (Credit account titles are automatically indented when the 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. Record journal entries in the order presented in the problem.) Account Titles and Explanation Debit Credit Cost of Goods Sold (To record depreciation.) (To record exchange of machineries.)

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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Whispering Co. had a sheet metal cutter that cost $100,000 on January 5, 2021. This old cutter had an estimated life of ten years and a salvage value of $17,000. On April 3, 2026, the old cutter is exchanged for a new cutter with a fair value of $60,000. The exchange lacked commercial substance. Whispering also received $15,000 cash. Assume that the last fiscal period ended on December 31, 2025, and that straight-line depreciation is used. (b) Prepare all entries that are necessary on April 3, 2026. (Credit account titles are automatically indented when the 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. Record journal entries in the order presented in the problem.) Account Titles and Explanation Cost of Goods Sold (To record depreciation.) (To record exchange of machineries.) Debit Credit
Susan Co. has a machine that cost $810,000 on March 20, 2017. This old machine had an estimated life of ten years and a salvage value of $30,000. On December 23, 2021, the old machine is exchanged for a new machine with a fair value of $522,000. The exchange lacked commercial substance. Susan also received $58,000 cash. Assume that the last fiscal period ended on December 31, 2020, and that straight-line depreciation is used. Show the calculation of the amount of gain or loss to be recognized by Susan Co. from the exchange.
The Harry Corporation purchased a machine on January 1, 2020. The machine cost 46,000, with an estimated salvage value of P 2,000 and an estimated useful life of 10 years. As a result of technological improvements, a revision of the machine's useful life and estimated salvage value was made. On January 1, 2021, the equipment was estimated to last through 2022, with an estimated value at the end of 2022 of P 500. Harry uses the straight-line depreciation method. What is the revised depreciation in year 2021?
The Potter Corporation purchased a machine on January 1, 2020. The machine cost P 46,000, with an estimated salvage value of P 2,000 and an estimated useful life of 10 years. As a result of technological improvements, a revision of the machine's useful life and estimated salvage value was made. On January 1, 2021, the equipment was estimated to last through 2022, with an estimated value at the end of 2022 of P 500. Potter uses the straight-line depreciation method. What is the revised depreciation in year 2021?
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Rogers Co. had a sheet metal cutter that cost $240,000 on January 1, 2013. This old cutter had an estimated life of ten years and a salvage value of $40,000. On April 1, 2018, the old cutter is exchanged for a new cutter with a fair value of $120,000. Rogers also received $30,000 cash. Assume that the last fiscal period ended on December 31, 2017, and that straight-line depreciation is used. Instruction: Record any entries required on April 1, 2018.
Rayya Company purchases a machine for $126,000 on January 1, 2021. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is sold on July 1, 2025, during its fifth year of service. Prepare entries to record the partial year’s depreciation on July 1, 2025, and to record the sale under each separate situation. (1) The machine is sold for $63,000 cash. (2) The machine is sold for $52,920 cash.
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A corporation bought a machine for RP 8,000 with a commercial useful life of 4 years and a fiscal useful life of 3 years, but no salvage value, in early 2019. In both commercial and fiscal terms, machines are assembled utilizing the straight-line method. In addition, the company will receive Rp. 6,000 in 2019, with the warranty charge anticipated to be 10% of revenue. The warranty cost is due in fiscal year 2022. The general rate of taxation is 30%. Required: Calculate and explain the deferred tax asset or obligation for the two transactions at the end of 2019!
On January 1, 2025, a machine was purchased for $1,040,000 by Metlock Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Ivanhoe Inc. for 3 years on January 1, 2025, with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a residual value at the end of the lease term of $562,500, though this amount is unguaranteed. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. How much should Metlock report as income before income tax on this lease for 2025? Income before income tax $ (b) eTextbook and Media List of Accounts Date 130,000 Record the journal entries Ivanhoe would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the rate implicit in the lease is unknown. (List all debit entries…
On January 1, 2025, a machine was purchased for $1,040, 000 by Metlock Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Ivanhoe Inc. for 3 years on January 1, 2025, with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a residual value at the end of the lease term of $562, 500, though this amount is unguaranteed. Click here to view factor tables. ( For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. How much should Metlock report as income before income tax on this lease for 2025? Income before income tax $ eTextbook and Media List of Accounts Attempts: 1 of 4 used (b) Record the journal entries Ivanhoe would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the rate implicit in the lease is unknown. (List all…
Fenner Co. purchased a lathe machine for $72,000 on January 5, 2013. This (old) lathe had an estimated life of ten years and salvage value of $12,000. On April 3, 2020, the old lathe was exchanged for a similar lathe (in an exchange with no commercial substance) with a list price of $45,000. Fenner also paid $9,000 cash. The old lathe had a fair market value of $34,000 on April 3, 2020. Assume that the last fiscal period ended on December 31, 2019, and that straight-line depreciation is used on the basis of nearest full month. Compute the book/carrying value of the old lathe on April 3, 2020. Compute the gain (loss) on disposal booked by Fenner Co. on April 3, 2020. Prepare the journal entry made by Fenner Co. on April 3, 2020, to record the exchange of assets. Now assume that the fair market value of the old lathe on April 3, 2020, is $26,000 instead. Compute the gain (loss) on disposal booked by Fenner Co. on April 3, 2020.