In January, Prahbu purchased for $93,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $ 3,550 to install the machine, and after the machine is installed, he pays $2,000 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $4,700 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost
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- In January, Prahbu purchased for $100,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $4,075 to install the machine, and after the machine is installed, he pays $2,350 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $5,400 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine?In janaruary, Prahbu purchased a new machine for use in the existing production line of his manufacturing business for $90,000. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $2,500 to install the machine, and after the machine is installed, he pays $1,300 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete and prahbu places the machine in service on the production line. On December 3, prahbu pays another $3,300 to perform periodic qaulity testing after the machine is placed in service. . How much will prahbu be required to capitalize as the cost of the machine.?in the new building? 40. In January, Prahbu purchased for $90,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $2,500 to install the machine, and after the machine is installed, he pays $1,300 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $3,300 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine? Donn 11 LO 2-1 resear
- Dean and Donna Testa hired a home inspector before they purchase a $250,000 home. The inspector charged $400. The original contract for his services contained a clause titled, "Consequential Damages." The clause was drafted by the Testa's and stated that if the inspection failed to identify flaws which resulted in expensive repairs, the inspector would pay for the repairs. The inspector's final report stated that the home's septic system had all 4 required parts. A reasonably competent inspector would have discovered that the system did not have all 4 parts. Each of the 4 part costs $10,000. After the purchase, the Testa's discover that 2 of the 4 parts of the septic system are missing. The Testa's sue the inspector. Group of answer choices The Testa's damages are limited to the value of the contract, $400. The Testa's may recover punitive damages for fraud. The Testa's may recover $20,000 The Testa's may recover $40,000.Cramer subcontracted to Williams the furnishing and installation of all equipment for a large pumping station. The operation of the pumps, said the original contract, was to be guaranteed for one year. When the plant started to operate, certain defects in the pumps were discovered. To whom will the owner look for remedy - the contractor or the subcontractor? Why?A factory owned by XYZ Inc. was destroyed by fire. XYZ inc. lodged an insurance claim for the value of the factory building, plant, and an amount equal to one year’s net profit. During the year there were a number of meetings with the representatives of the insurance company. Finally, before year-end, it was decided that XYZ Inc. would receive compensation for 90% of its claim. XYZ Inc. received a letter that the settlement check for that amount has been mailed, but it was not received before year-end. How should XYZ Inc. treat this in its financial statements? Because the settlement of the claim was conveyed by a letter from the insurance company that also stated that the settlement check was in the mail for 90% of the claim, record 90% of the claim as a receivable as it is virtually certain that the contingent asset will be received. Wait until next year when the settlement check is actually received and not recognized or disclose this receivable at all since at year-end it is a…
- Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000.Company paid sales taxes of $2,100 at the date of purchase. Freight charges for theequipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged by an employee. It cost $400 to repair this damage. Blake furniture will depreciate this equipment by the straight-line method (half-year convention) and 150% declining balance method over an estimated useful life of 4 years assuming a $3,000 scrap value. Prepare depreciation schedulesBlake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000.Company paid sales taxes of $2,100 at the date of purchase. Freight charges for theequipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged by an employee. It cost $400 to repair this damage. Blake furniture will depreciate this equipment by the straight-line method (half-year convention) and 150% declining balance method over an estimated useful life of 4 years assuming a $3,000 scrap value. Prepare depreciation schedules. Give reasons for switching to straight line method in both the accelerated methods. Management wants to report the highest possible earnings in its financial statements, yet it also wants to minimize its taxable income reported to the tax authorities. Explain how both of these objectives can be met. Depreciation is often considered as…taxpayer purchased a building for $250,000 for his business. Before beginning to use the property in operations, the Taxpayer replaced the old air conditioning system with a new one at a cost of $25,000. In addition, he removed the doors and windows and installed new doors and windows at a cost of $40,000. Similarly, he hired a landscape gardener who changed the green areas around the building with an investment of $3,000. Ultimately, the building was painted at a cost of $5,000. Determine the starting base. Select one: a. $315,000 b. $275,000 C. $318,000 d. $323,000
- Last year Acme paid Ralph $15,000 to install a new air-conditioning unit at its headquarters building. The air conditioner did not function properly, and this year Acme requested that Ralph return the payment. Because Ralph could not repair one critical part in the unit, he refunded the cost of the repair, $5,000, to Acme. A> Is Ralph required to include the $15,000 payment he received last year in his gross income from last year? B> What are the tax implications of the repayment if Ralph was in the 35 per cent tax bracket when he received the $15,000 payment from Acme, but was in the 28 per cent tax bracket when he refunded $5,000 to Acme? C> How would you answer the question in part (b) if Ralph refunded $2,500 to Acme and not $5,000?Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000. Company paid sales taxes of $2,100 at the date of purchase. Freight charges for the equipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged It cost $400 to repair this damage. Blake furniture will depreciate this equipment by straight-line method with half-year convention over an estimated useful life of 3 years assuming a $3,000 scrap value. a. Prepare depreciation schedule. b. Give reasons for switching to straight line method in both the accelerated methods. c. Management wants to report the highest possible earnings in its financial statements, yet it also wants to minimize its taxable income reported to the tax authorities. Explain how both of these objectives can be met. d. Do you agree that depreciation is often considered as major source of funds?…Neptune purchased a new storage facility on April 1, 2021. The new building cost $80,000. A new member of the accounting team recorded depreciation on the new facility using the sum-of-the-years (SYD) method. The manager was impressed with his hard work, since he appropriately used partial year depreciation and used the method correctly. However, she had to remind him Neptune uses the straight line method for buildings. Unfortunately, the mistake in method wasn't corrected before the financial statements were created. Critical Thinking Calculate each of the required ratios using the original values (before any changes) and the updated values (after your changes). At the time of the purchase, the operations manager estimated that the new facility would be used for 5 years and would have a $2,000 salvage value. What are the journal entries for this scenario?