On July 1, 2015, Seto, Inc. purchased a fire extinguisher system for $130,000 from MTI Systems. The
Question:
MTI asked for $80,000 cash payment upon purchase, $10,000 is due on July 31, 2015, with a 2% discount if Seto makes the payment by July 10, and a $40,000 one-year note payable plus 6% interest due on June 30, 2016. Seto paid the invoice on July 31. Seto uses the straight-line depreciation method.
On January 1, 2017, Seto replaced a valve component costing $38,700, and as a result, the useful life of the fire extinguisher system increased by three years. On September 3, 2018, the fire extinguisher system was destroyed by a factory fire. Seto made a claim to the insurance company. Subsequently, Seto received $125,000 cash on September 30, 2018.
Requirements
1. Calculate the acquisition cost of the fire extinguisher system.
2. Prepare all journal entries for 2015, 2016, 2017, and 2018.
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Related Book For
Financial Accounting
ISBN: 978-0133375534
2nd Canadian edition
Authors: Jeffrey Waybright, Robert Kemp, Sherif Elbarrad
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