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Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you. 1 . Holtzman purchased equipment on January 2, 2011, for $82,900. At that time, the equipment had an estimated useful life of 10 years with a $5,900 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,300 salvage value. During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $500,000. It had a useful life of 10 years and a salvage value of $37,000. The following computations present depreciation on both bases for 2012 and 2013. 2 . 2013 Straight-line Declining-balance 3 . 2012 $46,300 80,000 $46,300 100,000 Holtzman purchased a machine on July 1, 2012, at a cost of $160,000. The machine has a salvage value of $10,000 and a useful life of 8 years. Holtzman's bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value. Don't show me this message again for the assignment Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.) (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 1. 2. 3. Debit Credit (To record current year depreciation.) (To correct prior year depreciation.) Don't show me this message again for the assignment Show List of Accounts Link to Text Link to Text Link to Text Show comparative net income for 2013 and 2014. Income before depreciation expense was $319,626 in 2014, and was $276,965 in 2013. (Ignore taxes.) HOLTZMAN COMPANY Comparative Income Statements For the Years 2014 and 2011 2014 $ 2013 $ Income before depreciation expense Depreciation expense $ Net income $ 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 . 2 . 3 . Equipment A was purchased January 2, 2011. It originally cost $410,000 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-theyears' digits, and the estimates relating to useful life and salvage value remained unchanged. Equipment B was purchased January 3, 2010. It originally cost $280,500 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 $2,900. Equipment C was purchased January 5, 2010. The asset's original cost was $197,100, 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 . 2 . 3 . 4 . 5 . Income in 2014 before depreciation expense amounted to $405,000. Depreciation expense on assets other than A, B, and C totaled $58,900 in 2014. Income in 2013 was reported at $410,000. Ignore all income tax effects. 114,500 shares of common stock were outstanding in 2013 and 2014. Don't show me this message again for the assignment 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 1. 2. Debit Credit 3. (To correct equipment expensed.) (To record depreciation.) Don't show me this message again for the assignment Show List of Accounts Link to Text Link to Text Link to Text Prepare comparative retained earnings statements for Madrasa Inc. for 2013 and 2014. The company had retained earnings of $151,000 at December 31, 2012. MADRASA INC. Comparative Retained Earnings Statements For the Years Ended 2014 2013 $ $ : : $ Don't show me this message again for the assignment Show List of Accounts $ \fHoltzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you. 1 . Holtzman purchased equipment on January 2, 2011, for $82,900. At that time, the equipment had an estimated useful life of 10 years with a $5,900 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,300 salvage value. During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $500,000. It had a useful life of 10 years and a salvage value of $37,000. The following computations present depreciation on both bases for 2012 and 2013. 2 . 2013 Straight-line Declining-balance 3 . 2012 $46,300 80,000 $46,300 100,000 Holtzman purchased a machine on July 1, 2012, at a cost of $160,000. The machine has a salvage value of $10,000 and a useful life of 8 years. Holtzman's bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value. Don't show me this message again for the assignment Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.) (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 Depreciation expenses 1. Debit 12900 Accumulated depreciation Depreciation expenses 2. 12900 35375 Accumulated depreciation 3. Depreciation e Accumulated D Credit 35375 18750 18750 (To record current year depreciation.) Accumulated D 1875 Retained earn 1875 (To correct prior year depreciation.) Don't show me this message again for the assignment Show List of Accounts Link to Text Link to Text Link to Text Show comparative net income for 2013 and 2014. Income before depreciation expense was $319,626 in 2014, and was $276,965 in 2013. (Ignore taxes.) HOLTZMAN COMPANY Comparative Income Statements For the Years 2014 and 2011 2014 $ 2013 $ Income before depreciation expense Depreciation expense 319626 276965 67025 105825 $ $ Net income 252601 171140 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 . 2 . 3 . Equipment A was purchased January 2, 2011. It originally cost $410,000 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-theyears' digits, and the estimates relating to useful life and salvage value remained unchanged. Equipment B was purchased January 3, 2010. It originally cost $280,500 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 $2,900. Equipment C was purchased January 5, 2010. The asset's original cost was $197,100, 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 . 2 . 3 . 4 . 5 . Income in 2014 before depreciation expense amounted to $405,000. Depreciation expense on assets other than A, B, and C totaled $58,900 in 2014. Income in 2013 was reported at $410,000. Ignore all income tax effects. 114,500 shares of common stock were outstanding in 2013 and 2014. Don't show me this message again for the assignment 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 Depreciation Expenses 1. Debit 71750 Accumulated Depreciation Depreciation expenses 2. Credit 71750 41140 Accumulated Depreciation 3. Equipment C 41140 197100 Accumulated Depreciation 78840 Retained Earnings 118260 (To correct equipment expensed.) Depreciation Expenses Accumulated Depreciation 19710 19710 (To record depreciation.) Don't show me this message again for the assignment Show List of Accounts Link to Text Link to Text Link to Text Prepare comparative retained earnings statements for Madrasa Inc. for 2013 and 2014. The company had retained earnings of $151,000 at December 31, 2012. MADRASA INC. Comparative Retained Earnings Statements For the Years Ended 2014 2013 $ Retained Earnings, January 1, as reported 698970 $ 151000 Add : 137970 Error in Recording Equipment Net Income/(Loss) 272400 410000 : $ Retained Earnings, December 31 971370 Don't show me this message again for the assignment Show List of Accounts $ 698970 1 Depreciable vale DEP SLM Accm. Dep Book Value dep 2 DDm cost Accm Dep Book value 2011 77000 7700 7700 69300 2012 77000 7700 15400 61600 2012 100000 500000 100000 400000 2013 80000 500000 180000 320000 10000 9375 20000 18750 2011 410000 41000 41000 369000 2012 410000 41000 82000 328000 2010 280500 18700 18700 261800 2011 280500 18700 37400 243100 2010 197100 19710 19710 2011 197100 19710 39420 Dep SLM Accm Dep 3 Dep recorded Correct Dep 2 1 cost SLM Dep Accm dep book value Dep 2 cost dep Accm dep Book Value Dep 3 cost dep accm dep 2013 77000 7700 23100 53900 2014 77000 12900 2014 500000 35375 Total 30000 28125 1875 2013 410000 41000 123000 287000 2014 410000 71750 2012 280500 18700 56100 224400 2013 280500 18700 74800 205700 2014 280500 41140 2012 197100 19710 59130 2013 197100 19710 78840 2014 197100 19710