Professional Documents
Culture Documents
Assets
Additions
$ 5,000
17,500
40,400
$62,900
Final
12/31/X5
$ 60,000
173,250
$233,250
*Depreciation expense for the year.
Accum. Depr.
Additions*
$ 5,150
39,220
$44,370
Description
Land
Buildings
Machinery and Equipment
Description
Buildings
Machinery and Equipment
Assets
Retirements
$26,000
$26,000
Accum. Depr.
Retirements
Per Ledger
12/31/X6
$427,500
137,50
399,400
$964,400
Per Ledger
12/31/X6
$ 65,150
212,470
$277,620
All plant assets are depreciated on the straight-line basis (no residual value taken into
consideration) based on the following estimated service lives: building, 25 years; and all other
items, 10 years. The companys policy is to take on half-years depreciation on all asset
additions and disposals during the year.
Your audit revealed the following information:
1.
On April 1, the company entered into a 10-year leave contract for a die casting machine,
with annual rentals of $5,000 payable in advance very April 1. The lease is cancelable by
either party (60 days written notice is required), and there is no option to renew the lease or
buy the equipment at the end of the lease. The estimated service life of the machine is 10
years with no residual value. The company recorded the die casting machine in the
Machinery and Equipment account at $40,400, the present value at the date of the lease, and
$2,020 applicable to the machine has been included in depreciation expense for the year.
2.
The company completed the construction of a wing on the plant building on June 30. The
service life of the building was not extended by this addition. The lowest construction bid
received was $17,500, the amount recorded in the Buildings account. Company personnel
constructed the addition at a cost of $16,000 (materials, $7,500; labor, $5,500; and
overhead, $3,000)
3.
On August 18, $5,000 was paid for paving and fencing a portion of land owned by the
company and used as a parking lot for employees. The expenditure was charged to the Land
account.
4.
The amount shown in the machinery and equipment asset retirement column represents cash
received on September 5, upon disposal of a machine purchased in July 20X2 for $48,000.
The chief accountant recorded depreciation expense of $3,500 on this machine 20X6.
5.
Harbor City donated land and a building appraised at $100,000 and $400,000, respectively,
to Holman Corporation for a plant. On September 1, the company began operating the
plant. Since no costs were involved, the chief accountant made no entry for the above
transaction.
Required
Prepare the adjusting journal entries that you would propose at December 31, 20X6, to adjust the
accounts for the above transactions. Disregard income tax implications. The accounts have not
been closed. Computations should be rounded to the nearest dollar. Use a separate adjusting
journal entry for each of the above five paragraphs.