During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paidthe construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1,2025. Because of technological change, Sheffield anticipates that the manufacturing facility will be useful for no more than 10 years.The local government where the facility is located required that, at the end of the 10-year period, Sheffield remediate the facility sothat it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400.Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirementobligations.(a)Your answer is partially correct.Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Creditaccount titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" forthe account titles and enter O for the amounts. List all debit entries before credit entries. Round present value factor calculations to 5decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 5,125.)Account Titles and ExplanationPlant AssetsCash(To record payment to contractor)Plant AssetsAsset Retirement Obligation(To record asset retirement obligation)Debit5053000229115Credit50530000229115

Asset retirement obligation = Estimated cost of remediation after 10 years * PVF(9% for 10 years)…

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ng 2024, Shereld constructed a small manufacturing fa

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 13E: On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million....

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During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paid the construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1, 2025. Because of technological change, Sheffield anticipates that the manufacturing facility will be useful for no more than 10 years. The local government where the facility is located required that, at the end of the 10-year period, Sheffield remediate the facility so that it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400. Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirement obligations. (a) Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Credit account titles are automatically indented when the amount is entered. Do not…
During 2024, YellowCard constructed a small manufacturing facility specifically to manufacture one particular accessory. YellowCard paid the construction contractor $5,000,000 cash (which was the total contract price) and placed the facility into service on January 1, 2025. Because of technological change, YellowCard anticipates that the manufacturing facility will be useful for no more than 10 years. The local government where the facility is located required that, at the end of the 10-year period, YellowCard remediate the facility so that it can be used as a community center. YellowCard estimates the cost of remediation will be $500,000. YellowCard uses straight-line depreciation with $0 salvage value for its plant asset and a 10% discount rate for asset retirement obligations. Instructions Prepare the journal entries to record the January 1, 2025, transactionsPrepare adjusting entries to record depreciation and interest expense on December 31, 2025.
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During 2024, Novak constructed a small manufacturing facility specifically to manufacture one particular accessory. Novak paid the construction contractor $4,851,000 cash (which was the total contract price) and placed the facility into service on January 1, 2025. Because of technological change, Novak anticipates that the manufacturing facility will be useful for no more than 10 years. The local government where the facility is located required that, at the end of the 10-year period, Novak remediate the facility so that it can be used as a community center. Novak estimates the cost of remediation will be $402,100. Novak uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirement obligations. Prepare adjusting entries to record depreciation and accretion expense on December 31, 2025. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"…
Sandhill Inc. began work on a $8,900,000 non-cancellable contract in 2023 to construct an office building. During 2023, Sandhill incurred costs of $1,672,000, billed its customers for $1,450,000 (non-refundable), and collected $900,000. At December 31, 2023, the estimated future costs to complete the project totalled $2,728,000. Prepare Sandhill's 2023 journal entries using the percentage-of-completion method. (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.) Account Titles and Explanation (To record cost of construction) (To record progress billings) (To record collections) (To record revenues) (To record construction expenses) Debit Credit
Sandstorm Corporation decides to develop a new line of paints. The project begins in 2018. Sandstorm incurs the following expenses in 2018 in connection with the project:Salaries: $85,000Materials: $30,000Depreciation on equipment: $12,500The benefits from the project will be realized starting in July 2019. If an amount is zero, enter "0".If Sandstorm Corporation elects a 60-month deferral and amortization period, there is a $ for 2018 and a $ deduction for 2019.
In January, 2022, Harmony Inc. has the following expenditures related to manufacturing a new generation of its product. Match each expenditure to the appropriate accounting treatment on the right. Takes possession of a manufacturing machine. The vendor sends an invoice for $650,000. Pays a machine import duty of $35,000 to the government. Pays employees $75,000 for research and development to finalize the new product design. Receives an invoice for $4,250 from the company that shipped the machine. Pays employees $16,500 to install, customize, and test the new manufacturing machine. Pays…
Sandstorm Corporation decides to develop a new line of paints. The project begins in 2023. Sandstorm incurs the following expenses in 2023 in connection with the project: Salaries $170,000 Materials 51,000 Depreciation on equipment 25,500 The benefits from the project were realized starting in July 2024. If an amount is zero, enter "0". What are Sand-storm’s related deductions in 2023 and 2024 in connection with the project?
On January 1, 2017, the City of Hastings created a solid waste landfill that it expects to reach capacity gradually over the next 20 years. If the landfill were to be closed at the current time, closure costs would be approximately $1.2 million plus an additional $700,000 for postclosure work. Of these totals, the city must pay $50,000 on December 31 of each year for preliminary closure work. At the end of 2017, the landfill reached 3 percent of capacity. At the end of 2018, the landfill reached 9 percent of capacity. Also at the end of 2018, a reassessment is made; total closure costs are determined to be $1.4 million rather than $1.2 million.a. Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements?b. Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements?c. Assuming that the landfill is…
On January 1, 2017, the City of Hastings created a solid waste landfill that it expects to reach capacity gradually over the next 20 years. If the landfill were to be closed at the current time, closure costs would be approximately $1.2 million plus an additional $700,000 for postclosure work. Of these totals, the city must pay $50,000 on December 31 of each year for preliminary closure work. At the end of 2017, the landfill reached 3 percent of capacity. At the end of 2018, the landfill reached 9 percent of capacity. Also at the end of 2018, a reassessment is made; total closure costs are determined to be $1.4 million rather than $1.2 million. Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements? Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements? Assuming that the landfill is viewed…
On January 2, 2021, the Start-Up Company purchased a patent for a new consumer product for P90,000. At the time of purchase, the patent was valid for 15 years. Due to the competitive nature of the product, the patent was estimated to have a useful life of 10 years. On December 31, 2022, the product was removed from the market under governmental order because of a potential health hazard present in the product. What amount should Start Up report as loss from obsolescence during 2022, assuming amortization is recorded at the end of each year?
On April 30, 2020, Blue Spruce Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2020. Overall, the cost of the ship was $97 million, with an estimated useful life of 12 years and residual value of $30 million. Blue Spruce expects that the new ship, as a whole, will provide its greatest economic benefits in its early years of operation. After further research and discussion with management, it is determined that the ship consists of major parts with differing useful lives, residual values, and patterns of providing economic benefits: Pattern of benefits Total output (nautical miles) 7 million Part Cost Useful life Residual value Engines (6) $955,000 per engine 8 years $120,000 per engine Varies with activity Hull $3,750,000 10 years $510.000 Highest in early years 7.70 million Body $87.52 million 15 years $16.06 million Evenly over life of body 12.20 million The ship's first voyage took place on August 1,…