Reference no: EM13854062
Problems:
The Diamond Glitter Company is in the process of preparing its financial statements for 2012. Assume that no entries for depreciation have been recorded in 2012. The following information related to depreciation of fixed assets is provided to you.
1. The company purchased equipment on January 2, 2009, for $165000. At that time, the equipment had an estimated useful life of 7 years with a $25000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2012, as a result of additional information, the company determined that the equipment has a remaining useful life of 3 years with a $15000 salvage value.
|
2. During 2012, the company changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $625000. It had a useful life of 10 years and a salvage value of $50000. The following computations present depreciation on both bases for 2010 and 2011.
|
|
|
2011
|
2010
|
|
|
Straight-line
|
$ 57,500
|
$ 57,500
|
|
|
Declining-balance
|
$ 92,000
|
$ 115,000
|
|
3. The company purchased a machine on July 1, 2010, at a cost of $450000. The machine has a salvage value of $25000 and a useful life of 10 years. The company's bookkeeper recorded straight-line depreciation in 2010 and 2011 but failed to consider the salvage value.
|
4. The company has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows.
|
|
December 31, 2011
|
$ 5,400
|
|
|
|
December 31, 2012
|
$ 4,600
|
|
|
|
5. In reviewing the December 31, 2011, inventory, the company discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows. The company has already made an entry that established the incorrect December 31, 2012, inventory amount.
|
|
December 31, 2010
|
Understated
|
$ 32,000
|
|
|
December 31, 2011
|
Understated
|
$ 51,000
|
|
|
December 31, 2012
|
Overstated
|
$ 9,500
|
|
6. At December 31, 2012, the company decided to change to the straight -line method depreciation method on its retail display equipment from double-declining-balance. The equipment had an original cost of $250000 when purchased on January 1, 2011. It has a salvage value of 0 and a 8-year useful life. Depreciation expense recorded prior to 2012 under the double-declining-balance method was $62500. The company has already recorded 2012 depreciation expense of $46875 using the double-declining-balance method.
|
7. Before the current year, the company accounted for its income from long-term construction contracts on the completed-contract basis. Early this year, the company changed to the percentage-of-completion basis for accounting purposes but continues to use the completed-contract method for tax purposes. Income for the current year has been recorded using the new method. Prior year tax effects must be considered. The following information is available.
|
|
|
Pretax Income
|
|
|
|
|
Percentage-of-Completion
|
Completed-Contract
|
|
Prior to 2012
|
$320,000
|
$180,000
|
|
|
2012
|
$140,000
|
$120,000
|
|
|
Required:
|
|
|
|
|
Prepare the journal entries necessary at December 31, 2012, to record the corrections and changes made to date related to the information provided. The books are still open for 2012. The income tax rate is 35%. The company has not yet recorded its 2012 income tax expense and payable amounts so current-year tax effects may be ignored.
|
|
Calculate the payout ratio and return on common stock equity
: Calculate the payout ratio and return on common stock equity.
|
|
The ethics of mandated naptime
: Sleep deprivation is a brutal truth of college life and negatively affects performance in the classroom of college students. Medical Journal A says that lack of sleep causes blah, blah, blah (citation). This epidemic has also plagued college campuse..
|
|
What would be the result of adding an ip address
: What would be the result of adding an IP address in front of the port number in the Listen directive and Navigate to the ServerRoot directive and record the path that is contained in quotes to the right of the directive.
|
|
Testimony of credible witnesses
: As it was discussed in the class materials, people usually learn about, discover, or prove any reality in the following 3 methods: 1. Using sensory perceptions, 2. logical inference, and 3. reliance on expert testimony of credible witnesses.
|
|
Prepare the journal entries necessary
: Prepare the journal entries necessary
|
|
Corporation as something that transcends the intentions
: Throughout The Corporation, Bakan speaks of the "institutional logic" of the corporation as something that transcends the intentions (for good or ill) of its individual agents. Even when businessmen adopt a more "socially conscious" attitude and e..
|
|
How can police organizations ensure their current
: Are morals simply a society's way of defining right and wrong conduct? Explain. How can police organizations ensure their current, as well as potential, employees possess the proper level of good morals and values
|
|
Explain-using the isoquant-isocost diagram
: Explain, using the isoquant-isocost diagram, why a rise in the rental rate of capital coupled with no change in the wage rate will lead to a rise in the price of the capital-intensive good relative to the price of the labor-intensive good.
|