2 During the December 31, 2023 Financial Statement Audit, the company conducted a thorough internal. audit,...

 

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2 During the December 31, 2023 Financial Statement Audit, the company conducted a thorough internal. audit, during which the following facts were discovered. The audit occurred before any adjusting entries or closing entries are prepared. (Assume the 2022 books are closed) 1. The Company purchased a machine for $115,000 on January 1, 2020. Lundholm depreciates machines of this type by the straight-line method over a 7-year period using no salvage value. Due to a change in sales patterns, on January 1, 2023, management determines the useful life of the machine to be a total of 8 years, and has a salvage value of $15,000. What amount should Lundholm record for depreciation expense for 2023? 2. The Company purchased machinery on July 1, 2023. The machinery was valued at $2,250,000, with a $250,000 down payment, and the Company agreed to pay the balance in 6 equal installments ($394,035), payable each June 30. The company has a borrowing rate of 5.0%. There is no salvage value, and the useful life is 10 years. The following journal entries were recorded: 1-Jul-23 DR PP&E Machinery CR Note Payable DR CR CR DR Repairs and maintenance $250,000 CR Cash $250,000 3. A 10-year bonds were issued on September 1, 2022. The face value of the bonds totaled $200,000 with a stated rate of 8%. The market rate was 6% when the bonds were issued. Interest is paid annually on August 30 of each year. The following journal entry was recorded when the bonds were issued, and the interest paid: 9/1/2022 Bond Issuance. Cash Gain on Bonds Payable Bonds Payable 9/1/2023 DR CR $2,250,000 $2,250,000 Interest Expense Cash DR Retained earnings CR Common stock $229,440 $29,440 $200,000 $16,000 $16,000 4. (EXTRA CREDIT) Two years earlier, The Company recorded a 5% stock dividend (5,000 common shares, $1 par) as follows: $5,000 $5,000 The shares had a market price at the time of $20 per share. 2 During the December 31, 2023 Financial Statement Audit, the company conducted a thorough internal. audit, during which the following facts were discovered. The audit occurred before any adjusting entries or closing entries are prepared. (Assume the 2022 books are closed) 1. The Company purchased a machine for $115,000 on January 1, 2020. Lundholm depreciates machines of this type by the straight-line method over a 7-year period using no salvage value. Due to a change in sales patterns, on January 1, 2023, management determines the useful life of the machine to be a total of 8 years, and has a salvage value of $15,000. What amount should Lundholm record for depreciation expense for 2023? 2. The Company purchased machinery on July 1, 2023. The machinery was valued at $2,250,000, with a $250,000 down payment, and the Company agreed to pay the balance in 6 equal installments ($394,035), payable each June 30. The company has a borrowing rate of 5.0%. There is no salvage value, and the useful life is 10 years. The following journal entries were recorded: 1-Jul-23 DR PP&E Machinery CR Note Payable DR CR CR DR Repairs and maintenance $250,000 CR Cash $250,000 3. A 10-year bonds were issued on September 1, 2022. The face value of the bonds totaled $200,000 with a stated rate of 8%. The market rate was 6% when the bonds were issued. Interest is paid annually on August 30 of each year. The following journal entry was recorded when the bonds were issued, and the interest paid: 9/1/2022 Bond Issuance. Cash Gain on Bonds Payable Bonds Payable 9/1/2023 DR CR $2,250,000 $2,250,000 Interest Expense Cash DR Retained earnings CR Common stock $229,440 $29,440 $200,000 $16,000 $16,000 4. (EXTRA CREDIT) Two years earlier, The Company recorded a 5% stock dividend (5,000 common shares, $1 par) as follows: $5,000 $5,000 The shares had a market price at the time of $20 per share.

Answer rating: 100% (QA)

Based on the information provided here are the answers to the questions 1 The depreciation expense for 2023 should be calculated based on the change in useful life and salvage value of the machine The ... View the full answer