P10-2

Cost subsequence to acquisition.

Prepare adjusting entries at december 31, 2011 to correct book, assuming the have not been closed for the year.

U planning by the Required Prepare adjusting entries on December 31, 2010, to properly reclassify the preceding items. P10-2 Costs Subsequent to Acquisition As the first auditor of the Newberg Company entries have been made in the property, plant, and equipment account: the first auditor of the Newberg Company, you discover that the following 6,310 Property, Plant, and Equipment 2009 2009 Plant purchased 60,000 Depreciation Legal fees 700 Insurance 2,400 2010 2010 Repairs 2,000 Depreciation Addition to building 10,000 2011 2011 Repairs 3,000 Machine sold Insurance 2,800 Depreciation Machine purchased 7,000 6,879 500 7,421 You discover the following additional information: 1. The purchase of the plant included a building and machinery. When the plant was purchased, an appraisal showed that the building was valued at $39,000 and the machinery at $26,000. 2. Depreciation has been recorded each year at 10% of the balance in the account. The 10% was chosen because the prop- erty is being depreciated over 10 years for tax purposes. Subsequent investigation indicates that the expected lives at the time of acquisition were: building, 20 years, machinery, 8 years. 3. Each insurance payment was made on January 1 and was for a two-year policy. 4. The machine that was sold in 2011 had an original cost of $800. 5. All purchases and sales of property, plant, and equipment items occurred at the beginning of the year indicated. Required Prepare adjusting entries at December 31, 2011, to correct the books, assuming they have not been closed for the year. 19-3 Classification of Costs Associated with Assets The following account balances were included in the balance sheer