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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 Cyprus began business in 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 straightline basis no residual value taken into consideration
based on the following estimated service lives: building, years; and all other items, 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:
On November the company entered into a year lease contract for a die casting machine,
with annual rentals of $ payable in advance on November of each year. The property was
placed in service on December 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 years with no residual value. The
companys current cost of funds is
The company completed the construction of a new building in January and placed the asset in
service on May The entire balance in the CIP account pertains to the building.
On September $ was paid for paving and fencing a portion of land owned by the
company and used as a parking lot for employees ie land improvements The expenditure
was charged to the Land account.
The amount shown in the machinery and equipment asset retirement column $
represents cash received on September upon disposal of a machine purchased March
for $ The chief accountant recorded depreciation expense of $ on this machine in
The $ 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 $ of depreciation
on this addition in the current year.
Required:
On the worksheet provided. Prepare the adjusting journal entries that you would propose
at December 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.
Complete an AS ADJUSTED fixed asset rollforward schedule.PBC
tablePBCCYPRUS CORPORATION,Analysis of PP&E and Related Accumulated DepreciationFor the Year Ended December DescriptionAssets,tablePer LedgerPAJE #tableFinalAdditions,RetirementsLandBuildingsContruction in Progress Santa BlvdMachinery and equipment,Accumulated Depreciation,,DescriptiontableFinalAdditions,Retirements,tablePer LedgerBuildingsMachinery and equipment,
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