I don\'t know how to write the followong question,please help me with the step b
ID: 2433984 • Letter: I
Question
I don't know how to write the followong question,please help me with the step by step solution.On December 31, 2010, before the books were closed, the managementand accountings of madrasa Inc. made the following determinationsabout three depreciable assets.
1. Depreciable asset A was purchased January 2, 2007. It originallycost $540,000 and, for depreciation purposes, the straight-linemethod was originally chosen. The asset was originally expected tobe useful for 10 years and have a zero salvage value. In 2010, thedecision was made to change the depreciation method fromstraight-line to sum-of-the-year'-digits, and the estimatesrelating to useful life and salvage value remained unchanged.
2. Depreciable asset B was purchased January 3, 2006. It originallycost $180,000 and, for depreciation purposes, the straight-linemethod was chosen. The asset was oriinally expected to be usefulfor 15 years and have zero salvage value. In 2010, the decision wasmade to shorten the total life of this asset to 9 years and toestimate the salvage value at $3,000.
3. Depreciable asset C was purchased January 5, 2006. The asset'soriginal cost was $160,000, and this amount was entirely expensedin 2006. This particular asset has a 10-years useful life and nosalvage value. The straight-line method was chosen for depreciationpurposes.
Additional data:
1. Income in 2010 before depreciation expense amointed to$400,000.
2. Depreciation expense on assets other than A, B, and C totaled$55,000 in 2010.
3. Income in 2009 was reported at $370,000.
4. Ignore all income tax effects.
5. 100,000 shares of common stock were outstanding in 2009 and2010.
Instructions
(a) Prepare all neccessary entries in 2010 to record thesedeterminations.
(b) Prepare comparative retained earnings statements for MadrasaInc. for 2009 and 2010. The company had retained earning of$200,000 at December 31, 2008.
Explanation / Answer
Year Depreciation expense Accumulated depreciation Book Value 07 54,000 54,000 486,00 08 54,000 108,00 432,000 09 54,000 162,000 378,000 Remain useful life is 7 years, book value is 378,000 Use sum of digits years, depreciation will divide into1+2+3+4+5+6+7 = 28 portions Depreciation in 2010 = face value * 7/28 = 94,500 DepreciationExpense 94,500 AccumulatedDepreciation 94,500 (To record depreciation expense for asset A) Year Depreciation expense Accumulated depreciation Book Value 06 (180,000/15) = 12,000 12,000 168,000 07 12,000 24,000 156,000 08 12,000 36,000 144,000 09 12,000 48,000 132,000 Remain life is 5 years, salvage value 3,000, book value is132,000 Depreciation Expense for year 2010 = (132,000 - 3,000) /5 = 25,800 DepreciationExpense 25,800 AccumulatedDepreciation 25,800 (To record depreciation expense for asset B) DepreciationExpense 16,000 AccumulatedDepreciation 16,000 (To record depreciation expense for asset C) ** 160,000 / 10 = 16,000 Retained Statement Balance, Dec31,2008 200,000 Add:Income 370,000 Balance, Dec31,2009 570,000 Add: Income Beforedepreciation 400,000 Less: Depreciationexpense (201,300) Balance, Dec 31,2010 698,700
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