McClain Company incurred the following expenditures during 2013: April 9 The air conditioning system in the old

Question:

McClain Company incurred the following expenditures during 2013:

April 9 The air conditioning system in the old manufacturing facility was replaced for $83,000. The old air conditioning system had a cost of $74,000 and a book value of $2,000. The old air conditioning system had no scrap value.

June 29 Annual maintenance of $38,000 was performed.

Sep. 12 The roof of the old manufacturing facility is replaced at a cost of $65,000. This expenditure substantially extended the life of the facility.

Dec. 28 A new wing was added to the manufacturing facility at a cost of $275,000. This expenditure substantially increased the productive capacity of the plant.

Required:

1. Prepare journal entries to record McClain's expenditures for 2013.

2. Next Level What is the effect on the financial statements if management had improperly accounted for the:

a. addition of the new wing to the manufacturing facility

b. annual maintenance expenditures

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For  book-img-for-question

Intermediate Accounting Reporting and Analysis

ISBN: 978-1111822361

1st edition

Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach

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