Question

Exercise 14-6

The following information is available for Bailey Company for 2014:

1.		On January 2, 2014, Bailey paid property taxes amounting to $56,000 on its plant and equipment for the calendar year 2014. In late March 2014 Bailey made major repairs to its machinery amounting to $70,500. These repairs will benefit the remainder of the calendar year’s operations.
2.		An inventory loss of $164,000 from market decline occurred in August 2014. Bailey recorded this loss in August 2014 after its June 30 quarterly report was issued. None of this loss had been recovered by the end of 2014.
3.		At the end of July 2014, Bailey sold some equipment with a book value of $24,000 for $32,400.

State the dollar amounts that should appear in Bailey Company’s March 31, June 30, September 30, and December 31, 2014, quarterly financial statements to report: (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)

				Mar. 31		Jun. 30		Sept. 30		Dec. 31
A.		Property taxes		$		$		$		$
B.		Major repairs to machinery
C.		Inventory loss from market decline
D.		The gain or loss on sale of equipment

Answer 1

  March 31       June 30        Sept. 30           Dec. 31

A. Property taxes                          $ 14,000¹   $ 14,000         $ 14000         $ 14,000

B. Major repairs                                         0          23,500²           23,500            23500

C. Inventory loss                                       0                   0         164,000³                     0  

D. Gain on sale of equipment                   0                   0        8,400⁴               0

explanations :

1. 56000 / 4( quarters ) = 14000

2. 70500/ 3 ( quarters ) = 23500

3.164000

4. 32400 - 24000 = 8400 ( gain ).