Reference no: EM132485626

At December 31, 2022, Arnold Corporation reported the following plant assets.

Journalize equipment transactions related to purchase, sale, retirement, and depreciation.

Land                                                                 $ 3,000,000

Buildings                                                            $26,500,000

Less: Accumulated depreciation-buildings                  11,925,000

                                                                          14,575,000

Equipment                                                            40,000,000

Less: Accumulated depreciation-equipment                   5,000,000

                                                                          35,000,000

Total plant assets                                                 $52,575,000

During 2023, the following selected cash transactions occurred.

Apr.1

Purchased land for $2,200,000.

May1

Sold equipment that cost $600,000 when purchased on January 1, 2016. The equipment was sold for $170,000.

June1

Sold land for $1,600,000. The land cost $1,000,000.

July1

Purchased equipment for $1,100,000

Dec.31

Retired equipment that cost $700,000 when purchased on December 31, 2013. No salvage value was received.

Instructions

Question a. Journalize the transactions. (Hint: You may wish to set up T-accounts, post beginning balances, and then post 2023 transactions.) Arnold uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.

Question b. Record adjusting entries for depreciation for 2023.

Question c. Prepare the plant assets section of Arnold's balance sheet at December 31, 2023.

Tot. plant assets $50,037,500

AN Blythe Corporation and Jacke Corporation, two companies of roughly the same size, are both involved in the manufacture of shoe-tracing devices. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statements reveals the information shown below.

Question 1: Calculate and comment on return on assets, profit margin, and asset turnover.

                                                  Blythe Corp.                    Jacke Corp.

Net income                                     $ 240,000                   $ 300,000

Sales revenue                                  1,150,000                   1,200,000

Total assets (average)                       3,200,000                      3,000,000

Plant assets (average)                       2,400,000                     1,800,000

Intangible assets (goodwill)                   300,000                             0

Instructions

Question a. For each company, calculate these values:

1. Return on assets.
2. Profit margin.
3. Asset turnover.

Question b. Based on your calculations in part (a), comment on the relative effectiveness of the two companies in using their assets to generate sales. What factors complicate your ability to compare the two companies?