GENERAL MANUFACTURERS INC. purchased and installed a large puce of equipment at the beginning of 2021 and capitalized a cost of $3,174,000. This initial capital cost in General's books included the followmg expenditures Purchase price Freight charges Installation charges Annual maintenance contract Total $ 2,820,000 27,000 17,000 310,000 $ 3,174,000 GENERAL estimated a five-year useful life for the equipment and used sum-of-the-years digits depreciation. Because of the nature of the equipment, it has no residual value. The sum-of-the-years digits method was used by the company to determine depreciation expense for all equipment for 2019 and 2020. In mid-2021, after the 2020 financial statements were issued, the company decided to switch to the units of production method of depreciation for all equipment, including the newly acquired equipment. At that time, the company's controller discovered charche original cost of the equipment incorrectly included a five-year prepaid annual maintenance contract for the equipment. Additionally, the purchase price ($2,820.000) included freight and insurance charges as the machine was shipped FOB desnination and those cost totaling $55.000 were paid for by the vendor Required: Use the Accounting Standards Codification system to search for an answer to each question listed below. No computations or journal entries are needed in answering these questions Type your concise answers in the space provided and upload your completed document (MS Word) in the assignment area in Brightspace. Question/ What is an appropriate ASC Your Answer reference for your answer 1. Should the freighe charges associated wick General's equipment purchase be capitalized or aparsed? Note char the equipment we shipped FOB destination. Use the space below to your question. Make sure to list the ASC references) for your answer in the ASC reference column. ASC 2 Should the charge for the crna Mentence Contraer be cepitalized or expensed? Make sure to list the ASC oferences) for your answer in the ASC reference column ASC 3. How should General account for the change in depreciation method! Retrospectively or Prospectively? Make ture to list the ASC reference(s) for your answer in the ASC reference colume ASC 4 How should General account for errors included in the original capitalized cost of the equipment? Retrospectively or Prospectively. Make sure to lisr de ASC reference(s) for your entrer in the ASC reference calam. You miest list in Summary form each error that occurred Lise any errors sou identify and briefly indicate whecker it should be cccounted for respectively or prospectively. Number se errors es skown below ASC a Error No. 1 b. Emor No.2 Error No: 3. d Error No.4 GENERAL MANUFACTURERS INC. purchased and installed a large piece of equipment at the beginning of 2021 and capitalized a cost of $3,174,000. This initial capital cost in General's books included the following expenditures: Purchase price Freight charges Installation charges Annual maintenance contract Total $ 2,820,000 27,000 17,000 310,000 $ 3,174,000 GENERAL estimated a five-year useful life for the equipment and used sum-of-the-years digits depreciation Because of the nature of the equipment, it has no residual value. The sum-of-the-years digits method was used by the company to determine depreciation expense for all equipment for 2019 and 2020. In mid-2021, after the 2020 financial statements were issued the company decided to switch to the units of production vetbad of depreciation for all equipment, including the newly acquired equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included a five-year prepaid annual maintenance contract for the equipment Addinonally, the purchase price (52.820,009) included freight and insurener charges as the machine was shipped FOB destination and those coses totaling $53.000 were perid for by the vender Required: Use the Accounting Standards Codification system to search for an awer to each question listed below. No computations or journal entries are needed in answering these questions Type your concise answers in the space provided and upload your completed document (MS Word) in the assignment area in Brghtspace Question What is an appropriate ASC Your Answer reference for your ser? 1 Skould the freighr cherges associated with Generel's equipment purchase be capitalized or greed? Note that the equipment was shuipped FOB desaineon. Use the speee below to CR Sour question. Meke sure to list the ASC reference(s) for your crear in the ASC reference colum ASC 2 Should the charge for the cel maintenance contreer be capitalized or expersed? Make sure to lische ASC references) for YORT SRLSSET In the ASC yefacce column ASC 3 How should General account for the change in depreciation method? Retrospective or Prospectively? Make sure to list the ASC oferences) for your answer in ke ASC reference ASC 4 How should Generel account for errors included in the angel epiteliged cost of the app Retrospectively or Prospectively. Make sure to list ke 4SC references) for your ser de 45C reference column. You mur lurin summary form eack error cher occurred. Letenyerere you dois and briefs indicate whether it should be counted for retrospective or prospectively: Nomber se error skoww below ASC 2 Error No. 1 b. Error No. 2 Error No 3 3: a Error No. 4
