M&M Inc. was preparing the annual financial statements and, as part of its year-end procedures, prepared the following schedule based on adjusted values at March 31, 2020: Asset Cost Accumulated Recoverable Residual Depreciation Remaining Depreciation Amount Value Method Life Furniture $25,000 $20,000 $10,000 $500 Straight Line 3 years Computer $2,000 $1,000 $500 $- Double 5 years Declining Land $105,000 $- $90,000 N/A N/A Unlimited Machine $90,000 $25,000 $35,000 $5,000 Straight Line 3 years Required I) Record the entry for any impairment loss assuming that M&M recorded no impairment losses in previous years. II) Record the entry for depreciation on each of the assets at March 31, 2020. Assume there was no change in residual or useful lives regardless of impairment losses.

M&M Inc. was preparing the annual financial statements and, as part of its year-end procedures, prepared the following schedule based on adjusted values at March 31, 2020: Asset Cost Accumulated Recoverable Residual Depreciation Remaining Depreciation Amount Value Method Life Furniture $25,000 $20,000 $10,000 $500 Straight Line 3 years Computer $2,000 $1,000 $500 $- Double 5 years Declining Land $105,000 $- $90,000 N/A N/A Unlimited Machine $90,000 $25,000 $35,000 $5,000 Straight Line 3 years Required I) Record the entry for any impairment loss assuming that M&M recorded no impairment losses in previous years. II) Record the entry for depreciation on each of the assets at March 31, 2020. Assume there was no change in residual or useful lives regardless of impairment losses.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 24CE

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At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the following three situations: 1. Machine X was purchased for 100,000 on January 1, 2015. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 45,000. The estimated residual value remains at 10,000, but the service life is now estimated to be 1 year longer than originally estimated. 2. Machine Y was purchased for 40,000 on January 1, 2018. It had an estimated residual value of 4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years-digits method for 2 years. Now, the company has decided to change to the straight-line method. 3. Machine Z was purchased for 80,000 on January 1, 2019. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is 8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2020. Ignore income taxes.
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