Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Morris Inc. recorded the following transactions over the life of a piece of equipment purchased in Year 1: Jan. 1, Year 1 Purchased equipment for
Morris Inc. recorded the following transactions over the life of a piece of equipment purchased in Year 1: Jan. 1, Year 1 Purchased equipment for $90,000 cash. The equipment was estimated to have a five-year life and $5,000 salvage value and was to be depreciated using the straight-line method. Dec. 31, Year 1 Recorded depreciation expense for Year 1. Sept. 30, Year 2 Undertook routine repairs costing $900. Dec. 31, Recorded depreciation expense for Year 2. Jan. 1, Year 3 Made an adjustment costing $2,500 to the equipment. It improved the quality of the output but did not affect the life and salvage value estimates. Dec. 31, Year 3 Recorded depreciation expense for Year 3. Jun. 1, Year 4 Incurred $850 cost to oil and clean the equipment. Dec. 31, Year 4 Recorded depreciation expense for Year 4. Jan. 1, Year 5 Had the equipment completely overhauled at a cost of $9,000. The overhaul was estimated to extend the total life to seven years. The salvage value did not change. Dec. 31, Year 5 Recorded depreciation expense for Year 5. Oct. 1, Year 6 Received and accepted an offer of $19,000 for the equipment. Required Use a horizontal statements model to show the effects of these transactions on the elements of the financial statements. The first event is recorded as an example. Determine the amount of depreciation expense to be reported on the income statements for Year 1 through Year 5. Determine the book value (cost accumulated depreciation) Morris will report on the balance sheets at the end of Year 1 through Year 5. Determine the amount of the gain or loss Morris will report on the disposal of the equipment on October 1, Year 6 Required ARequired BRequired CRequired D Use a horizontal statements model to show the effects of these transactions on the elements of the financial statements. The first event is recorded as an example. (Use + for increase, for decrease, and leave the cell blank if the element is not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). If an element was not affected by the transactions, leave the cell blank.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started