Question
Wiater Company operates a small manufacturing facility. On January 1, 2021, an asset account for the company showed the following balances: Equipment $ 345,000 Accumulated
Wiater Company operates a small manufacturing facility. On January 1, 2021, an asset account for the company showed the following balances:
Equipment | $ 345,000 |
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Accumulated Depreciation (beginning of the year) | 72,500 |
During the first week of January 2021, the following cash expenditures were incurred for repairs and maintenance:
Routine maintenance and repairs on the equipment | $ 3,750 |
---|---|
Major overhaul of the equipment that improved efficiency | 43,000 |
The equipment is being depreciated on a straight-line basis over an estimated life of 20 years with a $55,000 estimated residual value. The annual accounting period ends on December 31.
Required:
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Prepare the adjusting journal entry that would have been made at the end of 2020 for depreciation on the manufacturing equipment.
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Starting at the beginning of 2021, what is the remaining estimated life?
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Prepare the journal entries to record the two expenditures for repairs and maintenance during 2021.
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