Presented below is information related to Anderson, Inc. Instructions Comment on the appropriateness of the accounting procedures

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Presented below is information related to Anderson, Inc.


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Comment on the appropriateness of the accounting procedures followed by Anderson, Inc.

(a) Depreciation expense on the building for the year was $60,000. Because the building was increasing in value during the year, the controller decided to charge the depreciation expense to retained earnings instead of to net income. The following entry is recorded.
Retained Earnings                                        60,000
Accumulated Depreciationā€”Buildings                      60,000

(b) Materials were purchased on January 1, 2012, for $120,000 and this amount was entered in the Materials account. On December 31, 2012, the materials would have cost $141,000, so the following entry is made.

Inventory                                                    21,000
Gain on Inventories                                                    21,000

(c) During the year, the company purchased equipment through the issuance of common stock. The stock had a par value of $135,000 and a fair value of $450,000. The fair value of the equipment was not easily determinable. The company recorded this transaction as follows.

Equipment                                               135,000
Common Stock                                                         135,000

(d) During the year, the company sold certain equipment for $285,000, recognizing a gain of $69,000. Because the controller believed that new equipment would be needed in the near future, she decided to defer the gain and amortize it over the life of any new equipment purchased.

(e) An order for $61,500 has been received from a customer for products on hand. This order was shipped on January 9, 2013. The company made the following entry in 2012.

Accounts Receivable                                61,500
Sales Revenue                                                           61,500

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Intermediate Accounting

ISBN: 978-0470587287

14th Edition

Authors: kieso, weygandt and warfield.

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