What impact does the interest paid on the 10 percent note have on the cost of the machine? Under what circumstances can interest expense be included in acquisition cost?ĥ. Compute the depreciation expense to be reported for Year 1. Compute the acquisition cost of the machine.ģ. Use the following schedule:ĭate $\quad$ Assets =$\quad$ Liabilities +$\quad$ Stockholders' EquityĢ. Indicate the effects (accounts, amounts, and + or - ) of each transaction (on January $1,2,3$, and 5. Required (round all amounts to the nearest dollar):ġ. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $\$ 4,000$. On July 1 ,>the company paid the balance due on the machine plus the interest. On January 5, Ashkar paid installation costs relating to the machine amounting to $\$ 2,500$. On January 3, it paid $\$ 1,000$ for freight on the machine. On the date of delivery, January 2, the company paid $\$ 6,000$ on the machine, with the balance on credit at 10 percent interest due in six months. Goodwill (an intangible asset with an indefinite life).ĭetermining Financial Statement Effects of an Asset Acquisition and Depreciation (StraightLine Depreciation)ĭuring Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $\$ 21,000$. It lets you organize your belongings in collections. Depreciation of the fixed assets (straight line), assuming an estimated remaining useful life of 10 years and no residual value.ī. Blue Plum Home Inventory will help you make and maintain a home inventory for any property you own. Compute the adjustments that Weebok would make at the end of the current year (ending December 31) for the following:Ī. (Hint: Assets are purchased at market value in conformity with the cost principle.)Ģ. As you inventory your personal belongings, don’t forget all of your drawers, closets, attic, basement and if you’re brave, take a. Compute the amount of goodwill resulting from the purchase. Or use a home inventory app to help you compile your list. \end$ These values for the purchased assets were provided to Weebok by an independent appraiser.>Required:ġ. \quad Ending inventory (FIFO cost) & 50,450 & \\ \quad Goods available for sale & 217,000 & \\ \quad Beginning inventory & \$ 33,000 & \\ The preliminary current year income statement follows: The company applies the FIFO inventory costing method however, the company neglected to apply LCM to the ending inventory. Jaffa Company prepared its annual financial statements dated December 31 of the current year. Evaluating the Income Statement and Cash Flow Effects of Lower of Cost or Market
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