You are engaged in the examination of the financial statements of the Madle Corporation for the year ended December 31, 2007. The schedules for the property, plant, and equipment and the related accumulated depreciation accounts that follow have been prepared by the client. You have checked the opening balances to your prior year€™s audit workpapers. Your examination reveals the following information:
1. All equipment is depreciated on the straight-line basis (no salvage value taken into consideration) using the following estimated lives: buildings 25 years, all other items 10 years. The company€™s policy is to take one-half year€™s depreciation on all asset acquisitions and disposals during the year.
2. The company completed the construction of a wing on the plant building on June 30. The useful life of the building was not extended by this addition. The lowest construction bid received was $17,500, the amount recorded in the Buildings account. Company personnel were used to construct the addition at a cost of $16,000 (materials $7,500, labor $5,500, and overhead $3,000).
3. On August 18, $5,000 was paid for paving and fencing a portion of land owned by the company and used as a parking lot for employees. The expenditure was capitalized to the Land account.
4. The amount shown in the Machinery and Equipment asset retirement column represents cash received on September 4 upon disposal of a machine purchased four years ago in July for $48,000. The bookkeeper recorded depreciation expense of $3,500 on this machine in 2007.
5. Sydney City donated land and building appraised at $10,000 and $40,000, respectively, to the Madle Corporation for a plant. On September 1, the company began operating the plant. Because no costs were involved, the bookkeeper made no entry to record the transaction.

Required
Prepare the formal journal entries that you would suggest at December 31, 2007 to adjust the accounts for the transactions noted previously. Disregard income tax implications. The books have not been closed. Computations should be rounded off to the nearestdollar.

Transcribed Image Text:

MADLE CORP Analysis of Property, Plant, and Equipment, and of Related Accumulated Depreciation Accounts Year Ended December 31, 2007 Final 12/31 Per Books 12/31/07 ion Additions Assets: Land Buildings Machinery and Equipment 22,500 120,000 385,000 $527,500 5,000 17,500 40,400 $62,900 27,500 137,500 399.400 564,400 $26,000 $26,000 Accumulated Depreciation: Buildings Machinery and Equipment S 60,000 173,250 $233,250 5,150 39,220 544,370 S 65,150 212,470 $277,620 Depreclation expenses for the year