ACCT:2100 Introduction to Financial Accounting Spring 2018 Chapter 8 Take-Home Q

Question

ACCT:2100 Introduction to Financial Accounting Spring 2018 Chapter 8 Take-Home Quiz Truffle Bakery incurred each of the following transactions during 2017. Truffle uses the Units- of-Production Method on all machinery, and the 175% declining balance method on buildings. Round all unit-of-production computations to the nearest S.O A. On March 1, 2017 Truffle purchased a new oven. The cost of the oven was $375,000 and has a residual value of $85,000. The estimated total production of the oven is 150,000 machine hours. In 2017, the oven was used 3,750 machine hours during 2017. The machine was purchased with cash. B. Truffle reported the following information about its icing machine as of December 3, 2017 $750,000 250,000 450,000 425,000 Estimated future cash flows Fair value Purchased a patent on July 1, 2015 for $15,000. The company intends to use the patent for ten years. On January 1, 2017, Truffle spent $20,000 to extend the useful life of a dishwasher. The dishwasher was purchased on January 1, 2015. The estimated useful life at the time of purchase was 100,000 machine hours. It was purchased for $175,000 and had a residual value of S25,000. The dishwasher was used 4.500 and 3,250 hours in 2015 and 2016 respectively. The improvements extend estimated useful life by 30,000 machine hours. Truffle used 4,250 machine hours during 2017 Purchased land on October 1, 2017 to build new bakery. The parcel of land cost S435,000. In addition, Truffle paid S15,000 in realtor fees, and S35,000 to clear the land in preparation for construction. Truffle used a 5% note payable to complete the entire purchase. Principal and interest are due on 10/1/2019 Truffle sold an old bakery on July 1, 2017 for S1,100,000. The building was originally purchased on January 1, 2014 for $1,500,000 and has a residual value of S180,000. The bakery has a useful life of 20 years. C. D. E. F. Required . Prepare the original journal entries to record the occurrence of each transaction in 2017 2. Prepare all adjusting journal entries Truffle Bakery must prepare at December 31, 2017 3. Prepare a partial balance sheet and partial income statement for 2017. Show what Truffle would report based on the information provided.

Explanation / Answer

Note: Depreciation Schedule

1. Prepare the journal entries as follows Date Account Title and Explanation Debit Credit A Equipment - Oven $375,000                    Cash $375,000 To record purchase of oven D Equipment - Dishwasher $20,000                    Cash $20,000 To record additional costs to extent life of dishwasher E Land ($435,000 + $15,000 + $35,000) $485,000                5% Notes payable $485,000 To record purchase of land F Cash $1,100,000.00 Accumulated depreciation - Building $410,163.56                  Building $1,500,000.00                  Gain on sale of building $10,163.56 To record sale of building Depreciation expense $49,861.80               Accumulated depreciation - building $49,861.80 To record 6 months depreciation expense

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