(a)
Introduction:
The disposal of assets includes killing assets from the accounting records. .. Charge all aggregated deterioration and credit the fixed resource. Misfortune at a bargain. Charge money for the sum got, charge all gathered devaluation, charge the misfortune marked down of advantage record, and credit the fixed resource.
To choose:
Prepare a separate
(a)
Introduction:
The disposal of assets includes killing assets from the accounting records. .. Charge all aggregated deterioration and credit the fixed resource. Misfortune at a bargain. Charge money for the sum got, charge all gathered devaluation, charge the misfortune marked down of advantage record, and credit the fixed resource.
To choose:
Explain how the disposal of the fixed assets would affect the current period financial statements.
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Cornerstones of Financial Accounting
- A Cost of a Fixed Asset Mist City Car Wash purchased a new brushless car-washing machine for one of its bays. The machine cost $41,700. Mist City borrowed the purchase price from its bank on a 1-year, 8% note payable. Mist City paid $975 to have the machine transported to its place of business and an additional $200 in shipping insurance. Mist City incurred the following costs as a part of the installation: During the testing process, one of the motors became defective when soap and water entered the motor because its cover had not been installed properly by Mist Citys employees. The motor was replaced at a cost of $640. Required: 1. Compute the cost of the car-washing machine. 2. CONCEPTUAL CONNECTION Explain why any costs were excluded from the cost of the machine.arrow_forwardTree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $5,000,000 for the land. Tree Lovers will sell the lumber as it is harvested and it expects to deplete it over ten years (150 acres in year one, 300 acres in year two, 250 acres in year three, 150 acres in year four, and 100 acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.arrow_forwardDuring the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following: Asset Machine A Machine B Original Cost $63,000 14,500 6 years 5 years The machines were disposed of in the following ways: No a. Machine A: Sold on January 2, for $39,000 cash. b. Machine B: On January 2, this machine was scrapped with zero proceeds (and zero cost of removal). 1 Required: 1.&2. Prepare the journal entries related to the disposal of Machine A and Machine B on January 2 of the current year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 2 3 4 Date January 02 January 02 Residual Value $11,300 2,150 January 02 January 02 Estimated Life Cash No Journal Entry Required General Journal No Journal Entry Required Accumulated Depreciation (straight-line) $25,850 (3 years) 7,410 (3 years) Answer is not complete. Accumulated Depreciation-Equipment Equipment Gain…arrow_forward
- Windsor, Inc. purchased land adjacent to its plant to improve access for trucks making deliveries. Expenditures incurred in purchasing the land were as follows: purchase price, $59,200; broker's fees, $6,460; title search and other fees, $5,190; demolition of an old building on the property, $6,170; grading, $1,450; digging foundation for the road, $3,230; laying and paving driveway, $27,800; lighting $7,910; signs, $1,980. List the items and amounts that should be included in the Land account. $ Aarrow_forwardOn January 1, 20x2, Kent Corporation purchased a machine for $50,000. Kent paid shopping expenses of $500 as well as installation costs of $1,200. The machine was estimated to have a useful life of 10 years and estimated salvage value of $3,000. In January 20x3, additions costing $3,600 were made to the machine in order to comply with pollution control ordinances. These additions neither prolonged the life of the machine nor did they have any salvage value. If Kent records depreciation under the straight-line method, depreciation expense for 20x3 is a.$4,870 b.$5,170 c.$5,270 d.$5,570arrow_forwardMawn Company bought land and built a warehouse during 2019. It improperly debited the following related costs to an account titled Land and Buildings: Land purchase $22,000 Demolition of old building 3,000 Legal fees for land acquisition 1,500 Avoidable interest on loan for construction 2,900 Building construction 53,000 Assessment by city for sewer connection—city is responsible for maintenance 1,200 Landscaping (expected to be permanent in nature) 3,500 Equipment purchased for excavation 18,800 Pro rata portion of fixed overhead incurred during construction of building 15,000 Insurance on building during construction 1,000 Profit on construction 12,000 Compensation for injury to construction worker (not covered by the insurance policy purchased by Mawn) 3,000 Modifications to building ordered by building inspectors (due to poor planning by Mawn) 7,500 Delinquent property taxes on land paid in 2019 (land was purchased during the year) 2,500…arrow_forward
- Mawn Company bought land and built a warehouse during 2019. It improperly debited the following related costs to an account titled Land and Buildings: Land purchase $22,000 Demolition of old building 3,000 Legal fees for land acquisition 1,500 Avoidable interest on loan for construction 2,900 Building construction 53,000 Assessment by city for sewer connection—city is responsible for maintenance 1,200 Landscaping (expected to be permanent in nature) 3,500 Equipment purchased for excavation 18,800 Pro rata portion of fixed overhead incurred during construction of building 15,000 Insurance on building during construction 1,000 Profit on construction 12,000 Compensation for injury to construction worker (not covered by the insurance policy purchased by Mawn) 3,000 Modifications to building ordered by building inspectors (due to poor planning by Mawn) 7,500 Delinquent property taxes on land paid in 2019 (land was purchased during the year) 2,500…arrow_forwardPhoenix Co. acquired a large piece of specialized machinery used in its manufacturing process. The following costs were incurred in connection with the aquisition: Finder's fee $2,000 List price $230,000 Transportation fee $4,000 Speeding ticket during transportation $65 Installation fee $2,500 Cost to repair a door damaged during installation $1,200 Required: Which of the costs incurred by Phoenix Co. should be capitalized to the machinery account?arrow_forwardA truck costing $114000 was destroyed when its engine caught fire. At the date of the fire, the accumulated depreciation on the truck was $55000. An insurance check for $129000 was received based on the replacement cost of the truck. The entry to record the insurance proceeds and the disposition of the truck will include a credit to the Accumulated Depreciation account for $55000. credit to the Truck account of $59000. Gain on Disposal of $15000. Gain on Disposal of $70000.arrow_forward
- Cost and Depreciation On January 1, Quick Stop, a convenience store, purchased a new soft-drink cooler. Quick Stop paid $23,000 cash for the cooler. Quick Stop also paid $7.30 to have the cooler shipped to its location. After the new cooler arrived, Quick Stop paid $2,410 to have the old cooler dismantled and removed. Quick Stop also paid $820 to a contractor to have new wiring and drains installed for the new cooler, Quick Stop estimated that the cooler would have a useful life of 6 years and a residual value of $170. Quick Stop uses the straight-line method of depreciation. 1. Prepare any necessary journal entries to record the cost of the cooler. If an amount box does not require an entry, leave it blank. Jan. 1 2. Prepare the adjusting entry at the end of the year to record depreciation expense on the new cooles. If an amount box does not require an entry, leave it blank. Dec. 31 88 3. What is the book value of the cooler after the adjusting entry is made? D 4. Conceptual…arrow_forwardOn January 1, 2017, a rich citizen of the Town of Ristoni donates a painting valued at $300,000 to be displayed to the public in a government building. Although this painting meets the three criteria to qualify as an artwork, town officials choose to record it as an asset. There are no eligibility requirements for the gift. The asset is judged to be inexhaustible so that depreciation will not be reported.a. For the year ended December 31, 2017, what will be reported on government-wide financial statements in connection with this gift?b. How does the answer to requirement (a) change if the government decides to depreciate this asset over a 10-year period using straight-line depreciation?c. How does the answer to requirement (a) change if the government decides not to capitalize the asset?arrow_forwardOn January 1, 2018, Absolutely Bar & Grill purchased a building, paying $57,000 cash and signing a $100,000 note payable. The company paid another $66,000 to remodel the building. Furniture and fixtures cost $56,000, and dishes and supplies—a current asset—were obtained for $8,600. All expenditures were for cash. Assume that all of these expenditures occurred on January 1, 2018. Absolutely is depreciating the building over 25 years using the straight-line method, with estimated residual value of $54,000. The furniture and fixtures will be replaced at the end of five years and are being depreciated using thedouble-declining-balance method, with a residual value of zero. At the end of the first year, the company still had dishes and supplies worth $1,900. Show what the company will report for supplies, plant assets, and cash flows at the end of the first year on its income statement, balance sheet, and statement of cash flows. Begin with the income statement.…arrow_forward
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