On December 31, 2014, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three pieces of equipment.

1.	Equipment A was purchased January 2, 2011. It originally cost $520,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2014, the decision was made to change the depreciation method from straight-line to sum-of-the-years digits, and the estimates relating to useful life and salvage value remained unchanged.
2.	Equipment B was purchased January 3, 2010. It originally cost $249,000 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero salvage value. In 2014, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $3,200.
3.	Equipment C was purchased January 5, 2010. The assets original cost was $181,300, and this amount was entirely expensed in 2010. This particular asset has a 10-year useful life and no salvage value. The straight-line method was chosen for depreciation purposes.

Additional data:

1.	Income in 2014 before depreciation expense amounted to $391,000.
2.	Depreciation expense on assets other than A, B, and C totaled $55,100 in 2014.
3.	Income in 2013 was reported at $410,000.
4.	Ignore all income tax effects.
5.	126,900 shares of common stock were outstanding in 2013 and 2014.

Prepare all necessary entries in 2014 to record these determinations.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles	Debit	Credit
1.
2.
3. (To correct Equipment Expensed)
4. (To record depreciation)

Prepare comparative retained earnings statements for Madrasa Inc. for 2013 and 2014. The company had retained earnings of $200,000 at December 31, 2012.

MADRASA INC. Comparative Retained Earnings Statements For the Years Ended
2014	2013
Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported	$	$
AddLess: Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported
Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported
AddLess: Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported
Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported	$	$

Accounts:

Accounts Payable

Accounts Receivable

Accumulated Depreciation-Building

Accumulated Depreciation-Equipment

Accumulated Depreciation-Machinery

Advertising Expense

Amortization Expense

Allowance for Doubtful Accounts

Bad Debt Expense

Cash

Compensation Expense

Consignment Out

Construction in Process

Copyrights

Cost of Goods Sold

Deferred Gross Profit

Deferred Tax Liability

Depreciation Expense

Dividend Revenue

Due to Customer

Discount on Bonds Payable

Equipment

Equity Investments (Available-for-Sale)

Equity Investments (Equity Method)

Fair Value Adjustment

Finance Expense

Gain on Disposal of Plant Assets

Income Tax Receivable

Insurance Expense

Interest Expense

Interest Payable

Interest Receivable

Interest Revenue

Inventory

Inventory on Consignment

Investment Revenue

Lawsuit Liability

Lawsuit Loss

Loss Due to Market Decline of Inventory

Machinery

Maintenance and Repairs Expense

No Entry

Prepaid Insurance

Property, Plant, and Equipment

Purchases

Rent Revenue

Retained Earnings

Revenue from Investment

Salaries and Wages Expense

Salaries and Wages Payable

Sales

Sales Commission Expense

Sales Commission Payable

Sales Revenue

Sales Tax Expense

Sales Tax Payable

Share Capital

Supplies

Supplies Expenses

Trademarks

Unearned Rent Revenue

Unrealized Holding Gain or Loss - Equity

Unrealized Holding Gain or Loss - Income

Warranty Expense

Warranty Liabilit

Print by: KRISTIN CASTY AC410C X40 16M8W1 - D Hartman / ACC 410C - Week 5 - Chap 22 Homework - Hartman *Problem 22-6 On December 31, 2014, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three pieces of equipment. 1. Equipment A was purchased January 2, 2011. It originally cost $520,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2014, the decision was made to change the depreciation method from straightline to sum-of-the-years' digits, and the estimates relating to useful life and salvage value remained unchanged. 2. Equipment B was purchased January 3, 2010. It originally cost $249,000 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero salvage value. In 2014, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $3,200. 3. Equipment C was purchased January 5, 2010. The asset's original cost was $181,300, and this amount was entirely expensed in 2010. This particular asset has a 10-year useful life and no salvage value. The straightline method was chosen for depreciation purposes. Additional data: 1. 2. 3. 4. 5. Income in 2014 before depreciation expense amounted to $391,000. Depreciation expense on assets other than A, B, and C totaled $55,100 in 2014. Income in 2013 was reported at $410,000. Ignore all income tax effects. 126,900 shares of common stock were outstanding in 2013 and 2014. Prepare all necessary entries in 2014 to record these determinations. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit 1. 2. 3. (To correct equipment expensed.) (To record depreciation.) Prepare comparative retained earnings statements for Madrasa Inc. for 2013 and 2014. The company had retained earnings of $200,000 at December 31, 2012. MADRASA INC. Comparative Retained Earnings Statements For the Years Ended 2014 2013 $ $ $ $ : : Copyright 2000-2016 by John Wiley & Sons, Inc. or related companies. All rights reserved. Question Attempts: 0 of 5 used