1. Recording Depreciation and Repairs (6 points)

Namir Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2020, an asset account for the company showed the following balances:

Manufacturing equipment	$120,000
Accumulated depreciation through 2019	51,750

During 2020, the following expenditures were incurred for the equipment:

Routine maintenance and repairs on the equipment	$ 1,500
Major overhaul of the equipment that improved efficiency on January 2, 2020	12,500

The equipment is being depreciated on a straight-line basis over an estimated life of 10 years with a

$5,000 estimated residual value. The annual accounting period ends on December 31.

1. Prepare the adjusting entry that was made at the end of 2019 for depreciation on the manufacturing equipment.

2. Starting at the beginning of 2020, what is the remaining estimated life?

3. Prepare the journal entries to record the two expenditures during 2020.

2. Computing Working Capital; Explaining Working Capital (6 points)

Allen Corporation is preparing its 2019 balance sheet. The company records show the following selected amounts at the end of the accounting period, December 31, 2019:

Total assets	$630,000
Total noncurrent assets	392,000
Liabilities:
Notes payable (8%, due in 5 years)	15,000
Accounts payable	76,000
Income taxes payable	10,000
Liability for withholding taxes	5,000
Rent revenue collected in advance	8,000
Bonds payable (due in 15 years)	90,000
Wages payable	9,000
Property taxes payable	4,000
Note payable (10%, due in 6 months)	11,500
Interest payable (due in 2 months)	800
Common stock	100,000

1. Compute working capital.

2. Would your computations be different if the company reported $250,000 worth of contingent liabilities in the notes to the statements? Explain.