Problem 22-1 (Part Level Submission) Holtzman Company is in the process of prepa
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Question
Problem 22-1 (Part Level Submission) Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you. 1. Holtzman purchased equipment on January 2, 2011, for $68,000. At that time, the equipment had an estimated useful life of 10 years with a $4,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,500 salvage value. 2. During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $200,000. It had a useful life of 10 years and a salvage value of $23,000. The following computations present depreciation on both bases for 2012 and 2013. 2013 2012 Straight-line $17,700 $17,700 Declining-balance 32,000 40,000 3. Holtzman purchased a machine on July 1, 2012, at a cost of $180,000. The machine has a salvage value of $10,000 and a useful life of 8 years. Holtzman’s bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value. Collapse question part (a) Partially correct answer. Your answer is partially correct. Try again. Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit 1. Entry field with correct answer Depreciation Expense Entry field with correct answer 11575 Entry field with correct answer Entry field with correct answer Accumulated Depreciation-Equipment Entry field with correct answer Entry field with correct answer 11575 2. Entry field with correct answer Depreciation Expense Entry field with correct answer 13125 Entry field with correct answer Entry field with correct answer Accumulated Depreciation-Building Entry field with correct answer Entry field with correct answer 13125 3. Entry field with correct answer Depreciation Expense Entry field with incorrect answer Entry field with correct answer Entry field with correct answer Accumulated Depreciation-Machinery Entry field with correct answer Entry field with incorrect answer (To record current year depreciation.) Entry field with correct answer Accumulated Depreciation-Machinery Entry field with incorrect answer Entry field with correct answer Entry field with correct answer Retained Earnings Entry field with correct answer Entry field with incorrect answer (To correct prior year depreciation.) SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT LINK TO TEXT Attempts: 3 of 3 used Collapse question part (b) Show comparative net income for 2013 and 2014. Income before depreciation expense was $270,310 in 2014, and was $292,290 in 2013. (Ignore taxes.) HOLTZMAN COMPANY Comparative Income Statements For the Years 2014 and 2011 2014 2013 Income before depreciation expense $ $ Depreciation expense Net income
Explanation / Answer
Problem 22-1 (Part Level Submission) Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you. 1. Holtzman purchased equipment on January 2, 2011, for $68,000. At that time, the equipment had an estimated useful life of 10 years with a $4,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,500 salvage value. 2. During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $200,000. It had a useful life of 10 years and a salvage value of $23,000. The following computations present depreciation on both bases for 2012 and 2013. 2013 2012 Straight-line $17,700 $17,700 Declining-balance 32,000 40,000 3. Holtzman purchased a machine on July 1, 2012, at a cost of $180,000. The machine has a salvage value of $10,000 and a useful life of 8 years. Holtzman’s bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value.
Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.)
Problem 22-1 (Part Level Submission) Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you. 1. Holtzman purchased equipment on January 2, 2011, for $68,000. At that time, the equipment had an estimated useful life of 10 years with a $4,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,500 salvage value. 2. During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $200,000. It had a useful life of 10 years and a salvage value of $23,000. The following computations present depreciation on both bases for 2012 and 2013. 2013 2012 Straight-line $17,700 $17,700 Declining-balance 32,000 40,000 3. Holtzman purchased a machine on July 1, 2012, at a cost of $180,000. The machine has a salvage value of $10,000 and a useful life of 8 years. Holtzman’s bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value.
Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.)
(a) Depreciation Expenses ($47,600 - $2500)/4 $11,275 Accumulated Depreciation—Equipment $11,275 Machine Purchased on Jan 2 ,2011 $68,000 Less: Salvage Value ($4,000) $64,000 Useful life 10 Straightline Depreciation $6,800 Accumulated Depreciation—Equipment = $6,800 x 3 $20,400 Book value on jan 2,2014 = $68,000 - $20,400 $47,600 (b) Depreciation Expenses ($128,000 -$23,000(Salvage)/(10-2) years $13,125 Accumulated Depreciation—Building Building $200,000 Less: Double declining dep. 2012 ($32,000) Less: Double declining dep. 2013 ($40,000) Book value 2014 $128,000 (c) Depreciation Expenses ($180,000 -$10,000(Salvage)/ 8years $21,250 Accumulated Depreciation—machinery $21,250 Accumulated Depreciation—machinery($33750 -$31,875) $1,875.00 Retained Earnings $1,875.00 Depreciation recorded in 2012 & 2013 ($180,000 / 8) x 1.5 years]= $33,750 $33,750.00 Depreciation that should have been recorded in 2012 & 2013 ($21,250 x 1.5) = $31,875.0 b) HOLTZMAN COMPANY Comparative Income Statements For the Years 2014 and 2013 2014 2013 Income before depreciation expense $270,310 $292,910 Depreciation expense -$45,650 -$71,000 Net Income $224,660 $221,910 Depreciation 2013 = $8500 + $40000+(180,000/8) $71,000Related Questions
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