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Your firm is engaged to perform the audit of the financial statements of Cyprus Corporation for the year ended December 3 1 , 2 0

Your firm is engaged to perform the audit of the financial statements of Cyprus Corporation for the year
ended December 31,2023. Cyprus began business in 2015. As a first year staff, you have been tasked
with performing the procedures in connection with the property section of the audit. You received a PBC
from the client containing an analysis of the Property, Plant, and Equipment and related accumulated
depreciation accounts, including additions and retirements (see PBC schedule in the workbook you are
provided). You have already completed the first task in the audit program by tracing the beginning
balances on the PBC to your prior year's audit working papers.
All plant assets are depreciated on the straight-line basis (no residual value taken into consideration)
based on the following estimated service lives: building, 25 years; and all other items, 10 years. The
company policy states that depreciation begins in the month the asset is placed in service and no
depreciation is taken in month of disposal.
Your audit revealed the following information:
1. On November 1, the company entered into a 10-year lease contract for a die casting machine,
with annual rentals of $7,000 payable in advance on November 1 of each year. The property was
placed in service on December 1. The Company treated the lease as an operating lease for
financial statement purposes; however, you determined the lease should be treated as a capital
lease. The estimated service life of the machine is 10 years with no residual value. The
companys current cost of funds is 6%.
2. The company completed the construction of a new building in January and placed the asset in
service on May 1,2023. The entire balance in the CIP account pertains to the building.
3. On September 18, $8,000 was paid for paving and fencing a portion of land owned by the
company and used as a parking lot for employees (i.e., land improvements). The expenditure
was charged to the Land account.
4. The amount shown in the machinery and equipment asset retirement column ($25,000)
represents cash received on September 5 upon disposal of a machine purchased March 1,2019
for $60,000. The chief accountant recorded depreciation expense of $6,000 on this machine in
2023.
5. The $17,750 capitalized to the building account was for roof repairs after a recent hurricane. It
did not approve the asset or extend its useful life. The company recorded $4,260 of depreciation
on this addition in the current year.
Required:
1. On the worksheet provided. Prepare the adjusting journal entries that you would propose
at December 31,2023, to adjust the accounts for the above transactions. Computations
should be rounded to the nearest dollar. Use a separate adjusting journal entry for each of
the preceding five paragraphs.
2. Complete an AS ADJUSTED fixed asset rollforward schedule.PBC
\table[[,,,PBC,],[CYPRUS CORPORATION,],[Analysis of PP&E and Related Accumulated Depreciation],[For the Year Ended December 31,2023,],[Description,,Assets,\table[[Per Ledger],[12/31/23]],PAJE #],[],[\table[[Final],[12/31/22]],Additions,Retirements],[Land,210,000,8,000,,218,000,],[Buildings,580,000,17,750,,597,750,],[Contruction in Progress - Santa Blvd.,350,000,10,000,,360,000,],[Machinery and equipment,385,000,10,000,25,000,370,000,],[1,525,000,45,750,25,000,1,545,750,],[,Accumulated Depreciation,,],[Description,\table[[Final],[12/31/22]],Additions,Retirements,\table[[Per Ledger],[12/31/23]],],[Buildings,162,400,27,460,0,189,860,],[Machinery and equipment,173,250,39,000,0,212,250,],[335,650,66,460,0,402,110,]]
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