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Part (a) (4 points) The Phan Company purchased a machine on January 1, 2016. The machine cost $260,000 with a $10,000 residual value. The estimated
Part (a) (4 points) The Phan Company purchased a machine on January 1, 2016. The machine cost $260,000 with a $10,000 residual value. The estimated useful life of the machine was eight years. On January 1, 2018, due to technological innovations, the estimated useful life was reduced by four years from the original life, and the residual value was reduced by 25%. The Phan Company uses straight-line depreciation. Required: Prepare the journal entry to record the annual depreciation on December 31, 2018. Part (b) (7 points) Bolen Company's auditor discovered the following errors on December 31, 2020, before any adjustments have been recorded or the books are closed for the fiscal year. No errors were corrected during 2019. Required: Assume you discover the following errors. Prepare appropriate journal entries if needed. If no journal entry is needed, explain why. Ignore income taxes. (1) Ending inventory on December 31, 2019, was understated by $20,000. The Company uses a periodic inventory system. (2) A two-year insurance policy purchased on April 30, 2019, for $51,000 was debited to Prepaid Insurance. No adjustment was made on December 31, 2019, or December 31, 2020. Part C (3 points) Serena Industries used the LIFO inventory costing method for both book and tax purposes. At the beginning of 2020, Serena decided to change inventory cost methods to Weighted Average for both book and tax purposes. Inventory values at the end of each year are as follows: 2018 LIFO $200,000 400,000 Weighted Average $180,000 425,000 2019 Required: Prepare the journal entry at the beginning of 2020 to reflect this change. Ignore taxes
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