Answer in table format or correct format like for journal - date, account title, debit, credit, and answers aligned with the format.

Question 1. (20 marks)

Daltry Company has a December 31 year-end.

Part a) Daltry purchased the following assets on January 1, Year 1:

1. Purchased equipment for $84,000. This equipment is expected to be in service for 5 years, and the residual value of $24,000. Daltry will depreciate this equipment using the double declining balance method.

2. Purchased a building for $460,000. It will be depreciated over 20 years using the straight-line method and have a residual value of $160,000.

3. Purchased an ocean-going tugboat for $850,000. It is expected to provide 100,000 hours of service over its useful life and have a residual value of $120,000. It will be depreciated using the units of production method. In Year 1 it was used for 4,380 hours.

Instructions:

Prepare the three December 31 adjusting journal entries for these assets.

Part b) Partial year depreciation:

For partial year depreciation, Daltry rounds to the nearest month, except for items using units of production. Assume that instead of purchasing these assets on January 1, they were purchased as follows:

• Equipment: March 18

  Building: September 10

  Tug boat: October 22: From date of purchase to year end it was used 910 hours. In year 2 the tugboat was used 3,900 hours.

Instructions:

Prepare the three December 31 adjusting journal entries for these assets for both Year 1 and Year 2. Do all three Year 1 entries and then the Year 2 entries.

Remember to use standard journal entry format.

Question 2. (30 marks)

Base Company carried out the following transactions during Years 1 to Year 6.

Year 1:

• January 1: Purchased equipment for $120,000 cash. It has a 10-year life, a $20,000 residual value, and will be depreciated using the straight-line method.

• January 1: Purchased land for $280,000 cash.

• October 31: Borrowed $340,000 from the bank by issuing a three-month 9% note.

• December 31: Accrued interest on the note of October 31. You can round to the nearest full month.

• December 31: A pending product liability lawsuit will more likely than not be lost. A reasonable estimate of the loss is $50,000. We accrued the contingency.

• December 31: Journalized depreciation on the equipment.

Year 2:

• January 31: Repaid the October 31 note plus interest.

Year 6:

• July 10: Traded our land (acquired in Year 1) plus $60,000 cash for a small airplane. The airplane has a market value of $380,000.

• September 20: Sold the equipment for $52,000 cash. Depreciation expense for Years 2 to 5 has already been properly recorded.

Instructions:

Prepare all the required journal entries for the above transactions.

Question 4. (35 marks)

Monsoon Company carried out the following transactions related to its common and preferred shares.

Year 1

• January 1: Issued 8,000 common shares for $20 each.

• January 1: Issued 2,000 cumulative preferred shares for $30 each. The preferred shares pay a yearly dividend of $1.00 per share.

• February 7: Issued 2,000 common shares for a small parcel of land. The land has an appraised value of $42,000.

• November 30: Declared a dividend of $4,000 to be paid December 31.

• December 31: Paid the dividend declared on November 30.

Year 2:

• January 1: Issued 3,000 cumulative preferred shares for $80 each. They pay a yearly dividend of $1.50 per year.

• March 30: Issued 20,000 common shares for $22 each

• No dividends were declared during Year 2.

Year 3

• November 30: Declared a dividend of $15,000 to be paid December 31.

• December 31: Paid the dividend declared on November 30.

Year 4

• September 30: Declared a 10% common stock dividend to be distributed on October 31. On that date, the common shares were trading for $20.

• October 31: Distributed the common stock dividend.

• November 10: Reacquired 1,000 common shares for $19 each.

Instructions:

Prepare all the required journal entries for the above transactions.