Question

In: Accounting

7)    On January 1, Tiger Corp. paid $66,000 cash for machinery that was expected to...

7)    On January 1, Tiger Corp. paid $66,000 cash for machinery that was expected to last for 11 years.

  1. Is the machinery a current asset or a long-term asset? Why?
  1. Give Tiger’s journal entry to record the purchase of the machinery.
  1. Give Tiger’s journal entry to record depreciation expense on the machinery for the first year.
  1. Give Tiger’s journal entry to record depreciation expense on the machinery for the second year.
  1. What is the balance in accumulated depreciation at the end of the first year? At the end of the second year?
  1. What is the net (book) value of the machinery at the end of the first year? At the end of the second year? At the end of the 11th year?

Solutions

Expert Solution

Straight line Method

A

Cost

$        66,000.00

B

Residual Value

$                        -  

C=A - B

Depreciable base

$        66,000.00

D

Life [in years left ]

                          11

E=C/D

Annual SLM depreciation

$           6,000.00

Year

Book Value

Depreciation expense

Ending Book Value

Accumulated Depreciation

1

$             66,000.00

$           6,000.00

$      60,000.00

$         6,000.00

2

$             60,000.00

$           6,000.00

$      54,000.00

$      12,000.00

3

$             54,000.00

$           6,000.00

$      48,000.00

$      18,000.00

4

$             48,000.00

$           6,000.00

$      42,000.00

$      24,000.00

5

$             42,000.00

$           6,000.00

$      36,000.00

$      30,000.00

6

$             36,000.00

$           6,000.00

$      30,000.00

$      36,000.00

7

$             30,000.00

$           6,000.00

$      24,000.00

$      42,000.00

8

$             24,000.00

$           6,000.00

$      18,000.00

$      48,000.00

9

$             18,000.00

$           6,000.00

$      12,000.00

$      54,000.00

10

$             12,000.00

$           6,000.00

$         6,000.00

$      60,000.00

11

$                6,000.00

$           6,000.00

$                      -  

$      66,000.00

Solutions’

  1. Is the machinery a current asset or a long-term asset? Why?

Machinery is not a current asset it’s a long term fixed asset.

An asset is called current asset when it is expected to last for a year but an asset for more than a year is considered a long term asset.

  1. Give Tiger’s journal entry to record the purchase of the machinery.

Date

Accounts title

Debit

Credit

xxxxxx

Machinery

$      66,000.00

      Cash

$ 66,000.00

(To record purchase of equipment)
  1. Give Tiger’s journal entry to record depreciation expense on the machinery for the first year.

Year 1

Depreciation expense- Machinery

$        6,000.00

       Accumulated Depreciation – Machinery

$     6,000.00

(depreciation expense recorded)
  1. Give Tiger’s journal entry to record depreciation expense on the machinery for the second year.

Year 1

Depreciation expense- Machinery

$        6,000.00

        Accumulated Depreciation – Machinery

$     6,000.00

(depreciation expense recorded)
  1. What is the balance in accumulated depreciation at the end of the first year? At the end of the second year?

Balance of accumulated depreciation at the end of year 1 = $6000

At the end of second year = $12000

  1. What is the net (book) value of the machinery at the end of the first year? At the end of the second year? At the end of the 11th year?

Book value at the end of first year = $60000

At the end of second year = $54000

At the end of 11th year = $0.00

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

7)    On January 1, Tiger Corp. paid $66,000 cash for machinery that was expected to...
7)    On January 1, Tiger Corp. paid $66,000 cash for machinery that was expected to last for 11 years. a) Is the machinery a current asset or a long-term asset? Why? b) Give Tiger’s journal entry to record the purchase of the machinery. c) Give Tiger’s journal entry to record depreciation expense on the machinery for the first year. d) Give Tiger’s journal entry to record depreciation expense on the machinery for the second year. e) What is the...
On January 1, 2014, JVE Corp. paid $1,000,000 cash to acquire 35% of the common shares...
On January 1, 2014, JVE Corp. paid $1,000,000 cash to acquire 35% of the common shares of PG Corp. At the time of acquisition, the carrying amount of PG’s common shares was $900,000, and its retained earnings were $1,500,000. The fair values of the identifiable net assets (INA) approximated their carrying values except for the following: • The fair value of machinery was estimated to be $400,000; the net book value was $450,000. Other information follows: • The remaining useful...
Phillips Machinery Corporation purchased machinery for cash of $60,000 on January 1, 2014. The machine has...
Phillips Machinery Corporation purchased machinery for cash of $60,000 on January 1, 2014. The machine has an estimated useful life of 5 years and will be depreciated using the straight-line method with no salvage value. The machine was then leased to Roadway Company an 80% owned subsidiary under a 5-year operating lease for $15,000 per year, payable January 1, every year. Required 1. Record the 2014 entries for the purchase of the machine and the lease to Roadway Company on...
Machinery purchased for $47,800 by Bramble Corp. on January 1, 2015, was originally estimated to have...
Machinery purchased for $47,800 by Bramble Corp. on January 1, 2015, was originally estimated to have an 8-year useful life with a residual value of $3,000. Depreciation has been entered for five years on this basis. In 2020, it is determined that the total estimated useful life (including 2020) should have been 10 years, with a residual value of $3,600 at the end of that time. Assume straight-line depreciation and that Bramble Corp. uses IFRS for financial statement purposes. Prepare...
Machinery purchased for $56,000 by Eggo Corp. on January 1, 2013, was originally estimated to have...
Machinery purchased for $56,000 by Eggo Corp. on January 1, 2013, was originally estimated to have an eight-year useful life with a residual value of $4,000. Depreciation has been entered for five years on this basis. In 2018, it is determined that the total estimated useful life (including 2018) should have been 10 years, with a residual value of $4,500 at the end of that time. Assume straight-line depreciation and that Eggo Corp. uses IFRS for financial statement purposes. Required...
Machinery purchased for $41,200 by Swifty Corp. on January 1, 2015, was originally estimated to have...
Machinery purchased for $41,200 by Swifty Corp. on January 1, 2015, was originally estimated to have an 8-year useful life with a residual value of $6,000. Depreciation has been entered for five years on this basis. In 2020, it is determined that the total estimated useful life (including 2020) should have been 10 years, with a residual value of $7,000 at the end of that time. Assume straight-line depreciation and that Swifty Corp. uses IFRS for financial statement purposes. Prepare...
On January 1, 2019, Tiger corp. issued $1,200,000 of five-year zero interest bearing notes along with...
On January 1, 2019, Tiger corp. issued $1,200,000 of five-year zero interest bearing notes along with warrants to buy 100,000 common shares at $20 per share. On January 1, 2019 Tiger corp. had 9,600,000 shares outstanding and the market price was $19 per share. Tiger co. received $1,000,000 for the notes and warrants. If offered alone, on January 1, 2019 the notes would have been issued to yield 12% to the creditor. Assume that the company follows IFRS. Questions: Prepare...
Headland Corp. purchased machinery on January 1, 2016 for $462,000. Straight-line depreciation is used. At the...
Headland Corp. purchased machinery on January 1, 2016 for $462,000. Straight-line depreciation is used. At the time management estimated that the machinery would be used over 10 years and would have a residual value of $41,000. It is now December 31, 2020 and management has determined that the machine’s life is now a total of 12 years with no residual value. No adjusting journal entries have been recorded yet for the 2020 year-end. What journal entries are required to record...
Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as...
Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as a capital lease. Seven annual lease payments of $ 140,000 are required the end of each year, starting December 31, 2020. The present value of the lease payments are calculated using 10%. Title passes to Erica at the end of the lease. Erica uses the effective interest method of amortization for the lease. The company uses straight-line depreciation. The equipment’s expected useful life of...
Question # 6 Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and...
Question # 6 Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as a capital lease. Seven annual lease payments of $ 140,000 are required the end of each year, starting December 31, 2020. The present value of the lease payments are calculated using 10%. Title passes to Erica at the end of the lease. Erica uses the effective interest method of amortization for the lease. The company uses straight-line depreciation. The equipment’s expected...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT