AVONCORPORATION

Analysis of Property, Plant, and Equipment

and Related Accumulated Depreciation Accounts

Year Ended December 31, 2016

Final Assets Final

Description 12/31/2015 Additions Retirement 12/31/2016

Land $ 430,500 $11,200 $15,000 $426,700

Building 140,000 23,,000 - 163,000

Machinery & Equipment 365,000 194,000 83,300 475,700

$ 935,500 $228,200 $98,300 $1,065,400

Final Accumulated Depreciation Final

Description 12/31/2015 Additions* Retirements 12/31/2016

Buildings $70,000 $6,450 $- 76,450

Machinery & Equipment 173,250 43,880 32,250 184,880

$ 243,250 $50,330 $32,250 $ 261,330

* Depreciation Expense for the year

Avon Corporation depreciates all plant assets using the straight-line basis (no estimated residual value exists). Estimated service lives are 25 years for the building and 10 years for other items. The company's policy is to depreciate on a monthly basis in the years of acquisition and disposal.

Your audit revealed the following information regarding errors discovered during the audit:

1. On February 1, the company entered in to an eight-year lease contract for a die-casting machine, with annual rental payments of $7,500, payable in advance every February 1.The lease is cancelable by either party and there is no option to renew the lease or buy the equipment at the end of the lease.The estimated service life of the machine is 8 years with no residual value.The company recorded this transaction as a capital lease recording the lease obligation and the asset at $60,000, the present value at the date of the lease.It also recorded the applicable depreciation expense for the year on the machine.

2. The company had a new roof installed on one of its buildings (which it originally purchased on June 30, 2001).The new roof did not extend the life of the building.Completion of the work occurred on June 30, 2016 at a cost of $20,000.The old roof cost $15,000 with a book value of $7,500 at the time the new roof was completed.The company made all of the correct journal entries to record the disposition of the old asset and capitalization of the new asset but it calculated depreciation for the new roof with a useful life of 25 years.

Note: Depreciation expense for the rest of the building was properly recorded.

3. During May 2016, Avon Corporation was assessed $6,000 by the city for sewer repairs.Following the sewer repairs, the company decided to repave the parking lot and complete landscaping project (the nature of which constitutes an indefinite life).On August 31, 2016, the company paid $3,800 ($3,000 for paving and $800 for landscaping).The chief accountant charged all expenditures to the Land account.

4. Avon Corporation sold a machine on October 1, 2016 for $28,000 cash.The company purchased the machine on April 1, 2012 for $50,000.The chief accountant recorded depreciation expense of $5,000 on this machine in 2016.All other depreciation expense journal entries were recorded correctly in previous years.

1)Prepare the correcting journal entries that you would propose at December 31, 2016, for each of the five errors above.

2)Prepare corrected lead schedule for the Property, Plant, and Equipment and related accumulated depreciation accounts.