Question
For each of the following independent situations, give the journal entries to adjust and correct the books at the end of 2019. In all situations,
For each of the following independent situations, give the journal entries to adjust and correct the books at the end of 2019. In all situations, you are to assume that the company in question closes its books on December 31 of each year and that reversing entries have been properly recorded where needed except as indicated. The company records amortization of intangible assets by reducing the intangible asset account and does not use accumulated amortizations accounts.
1 a)
The company amortizes the cost of patents over a life of 10 years using the straight line method. A patent acquired on January 1, 2016 is reported at $10,500 on the trial balance before adjustments on December 31, 2019.
b.
Change in estimate Machine B was acquired at the beginning of 2016 at a cost of $50,000 and was depreciated by the straight line method on the basis of a useful life of 10 years and no residual value. During 2019 the company decided to change the estimated useful life of the machine from 10 years to 8 years.
c.
Correcting Entries prior periods
In recording adjusting entries at the end of 2017, depreciation in the amount of $3,000 computed by the straight line method on Machine C was omitted. Depreciation was properly recorded for 2018. This machine was still in use at the end of 2019 and depreciation for 2019 was properly recorded.
d.
The cost of acquiring Machine D at the beginning of 2017 in the amount of $40,000 was charged to the Repairs & Maintenance Expense account. This machine has an estimated life of 5 years with no residual value and should have been depreciated by the straight line method.
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