Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are engaged in the audit of the financial statements of Micro Corporation for the year ended December 31, 20X6. The accompanying analyses of the

You are engaged in the audit of the financial statements of Micro Corporation for the year ended December 31, 20X6. The accompanying analyses of the Property, Plant, and Equipment and related accumulated depreciation accounts have been prepared by the chief accountant of the client. You have traced the beginning balances to your prior years audit working papers.

MICRO CORPORATION
Analysis of Property, Plant, and Equipment
and Related Accumulated Depreciation Accounts
Year Ended December 31, 20X6
Description Final 12/31/X5 Assets Per Ledger 12/31/X6
Additions Retirements
Land $422,500 $5,000 $427,500
Buildings 120,000 17,500 137,500
Machinery and equipment 385,000 40,400 $26,000 399,400
$927,500 $62,900 $26,000 $964,400

Description Final 12/31/X5 Accumulated Depreciation Per Ledger 12/31/X6
Additions* Retirements
Buildings $60,000 $5,150 $65,150
Machinery and equipment 173,250 39,220 212,470
$223,250 $44,370 $277,620

*Depreciation expense for the year.

All plant assets are depreciated on the straight-line basis (no residual value taken into consideration) based on the following estimated service lives: building, 25 years; all other items, 10 years. The companys policy is to take one half-years depreciation on all asset additions and disposals during the year.

Your audit revealed the following information:

  1. The company completed the construction of a wing on the plant building on June 30. The service life of the building was not extended by this addition. The lowest construction bid received was $17,500, the amount recorded in the Buildings account. Company personnel constructed the addition at a cost of $16,000 (materials, $7,500; labor, $5,500; and overhead, $3,000).
  2. On August 18, $5,000 was paid for paving and fencing a portion of land owned by the company and used as a parking lot for employees. The expenditure was charged to the Land account.
  3. The amount shown in the machinery and equipment asset retirement column represents cash received on September 5 upon disposal of a machine purchased in July 20X2 for $48,000. The chief accountant recorded depreciation expense of $3,500 on this machine in 20X6.
  4. Harbor City donated land and a building appraised at $100,000 and $400,000, respectively, to Micro Corporation for a plant. On September 1, the company began operating the plant. Since no costs were involved, the chief accountant made no entry for the above transaction.

Required:

Prepare the adjusting journal entries that you would propose at December 31, 20X6, to adjust the accounts for the above transactions. Disregard income tax implications. The accounts have not been closed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round any division. Round your answers to the nearest dollar amount.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Sure lets go through each item and prepare the necessary adjusting journal entries for Micro Corpora... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Audit Analytics Data Science For The Accounting Profession

Authors: J. Christopher Westland

1st Edition

3030490904, 9783030490904

More Books

Students also viewed these Accounting questions

Question

Prove that ri\Ax \. Give a verbal explanation for this inequality.

Answered: 1 week ago