Question 1 Topic: Property, plant and equipment.
Answer both parts independently of each other.
PART A On 1 July 2018, ABC Ltd purchased and recorded equipment at its cost of acquisition of $320 000. The equipment is expected to have a useful life for seven years and an estimated residual value of $10 000. ABC Ltd depreciates the asset using the straight-line method. ABC Ltd uses the revaluation model to equipment and records accumulated depreciation using the net method. The reporting period end of ABC Ltd is 30 June. ABC Ltd revalued the equipment on 30 June 2020, when the fair value of the equipment was $250 000. On 1 July 2020, the useful life of the equipment is reassessed: it is expected to have a remaining useful life of 6 years. The estimated residual value remains unchanged. ABC Ltd revalued the equipment on 30 June 2021, when the fair value of the equipment was $180 000. On 30 June 2022 the equipment was sold for $200 000.
REQUIRED: (1) Prepare journal entries to account for the revaluation of the equipment of 30 June 2020. Show all working steps.
(2) Prepare journal entries to account for the revaluation of the equipment of 30 June 2021. Show all working steps.
(3) Prepare journal entries to account for the sale of the equipment of 30 June 2022. Show all working steps.
PART B
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a useful life of five years and was depreciated on a straight-line basis with no disposal value. ABC Ltd adopts the cost model for accounting for assets in this class. ABC Ltd makes the following estimates of the value of the machine: Date Net selling price Value in use Fair Value 30 June 2019 $550 000 520 000 590 000 30 June 2020 $460 000 420 000 490 000 Indicators of impairment were identified on 30 June 2019, while indicators of a reversal of impairment were found on 30 June 2020.
REQUIRED: Prepare journal entries relating to this asset from 30 June 2019 to 30 June 2020. Show the steps of impairment (or reversal of impairment) tests. Show all working (step by step)
In: Accounting
Question 1 Topic: Property, plant and equipment.
Answer both parts independently of each other.
PART A On 1 July 2018, ABC Ltd purchased and recorded equipment at its cost of acquisition of $320 000. The equipment is expected to have a useful life for seven years and an estimated residual value of $10 000. ABC Ltd depreciates the asset using the straight-line method. ABC Ltd uses the revaluation model to equipment and records accumulated depreciation using the net method. The reporting period end of ABC Ltd is 30 June. ABC Ltd revalued the equipment on 30 June 2020, when the fair value of the equipment was $250 000. On 1 July 2020, the useful life of the equipment is reassessed: it is expected to have a remaining useful life of 6 years. The estimated residual value remains unchanged. ABC Ltd revalued the equipment on 30 June 2021, when the fair value of the equipment was $180 000. On 30 June 2022 the equipment was sold for $200 000.
REQUIRED: (1) Prepare journal entries to account for the revaluation of the equipment of 30 June 2020. Show all working steps.
(2) Prepare journal entries to account for the revaluation of the equipment of 30 June 2021. Show all working steps.
(3) Prepare journal entries to account for the sale of the equipment of 30 June 2022. Show all working steps.
PART B
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a useful life of five years and was depreciated on a straight-line basis with no disposal value. ABC Ltd adopts the cost model for accounting for assets in this class. ABC Ltd makes the following estimates of the value of the machine: Date Net selling price Value in use Fair Value 30 June 2019 $550 000 520 000 590 000 30 June 2020 $460 000 420 000 490 000 Indicators of impairment were identified on 30 June 2019, while indicators of a reversal of impairment were found on 30 June 2020.
REQUIRED: Prepare journal entries relating to this asset from 30 June 2019 to 30 June 2020. Show the steps of impairment (or reversal of impairment) tests. Show all working (step by step)
In: Accounting
Question 1 Topic: Property, plant and equipment.
Answer both parts independently of each other.
PART A On 1 July 2018, ABC Ltd purchased and recorded equipment at its cost of acquisition of $320 000. The equipment is expected to have a useful life for seven years and an estimated residual value of $10 000. ABC Ltd depreciates the asset using the straight-line method. ABC Ltd uses the revaluation model to equipment and records accumulated depreciation using the net method. The reporting period end of ABC Ltd is 30 June. ABC Ltd revalued the equipment on 30 June 2020, when the fair value of the equipment was $250 000. On 1 July 2020, the useful life of the equipment is reassessed: it is expected to have a remaining useful life of 6 years. The estimated residual value remains unchanged. ABC Ltd revalued the equipment on 30 June 2021, when the fair value of the equipment was $180 000. On 30 June 2022 the equipment was sold for $200 000.
REQUIRED: (1) Prepare journal entries to account for the revaluation of the equipment of 30 June 2020. Show all working steps.
(2) Prepare journal entries to account for the revaluation of the equipment of 30 June 2021. Show all working steps.
(3) Prepare journal entries to account for the sale of the equipment of 30 June 2022. Show all working steps.
PART B
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a useful life of five years and was depreciated on a straight-line basis with no disposal value. ABC Ltd adopts the cost model for accounting for assets in this class. ABC Ltd makes the following estimates of the value of the machine: Date Net selling price Value in use Fair Value 30 June 2019 $550 000 520 000 590 000 30 June 2020 $460 000 420 000 490 000 Indicators of impairment were identified on 30 June 2019, while indicators of a reversal of impairment were found on 30 June 2020.
REQUIRED: Prepare journal entries relating to this asset from 30 June 2019 to 30 June 2020. Show the steps of impairment (or reversal of impairment) tests. Show all working (step by step)
In: Accounting
The following selected transactions relate to investment
activities of Ornamental Insulation Corporation during 2021. The
company buys debt securities, intending to profit from short-term
differences in price and maintaining them in an active trading
portfolio. Ornamental’s fiscal year ends on December 31. No
investments were held by Ornamental on December 31, 2020.
| Mar. | 31 | Acquired 8% Distribution Transformers Corporation bonds costing $590,000 at face value. | ||
| Sep. | 1 | Acquired $1,470,000 of American Instruments' 10% bonds at face value. | ||
| Sep. | 30 | Received semiannual interest payment on the Distribution Transformers bonds. | ||
| Oct. | 2 | Sold the Distribution Transformers bonds for $655,000. | ||
| Nov. | 1 | Purchased $2,350,000 of M&D Corporation 6% bonds at face value. | ||
| Dec. | 31 | Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are |
| American Instruments bonds | $ | 1,429,000 | |
| M&D Corporation bonds | $ | 2,429,000 | |
(Hint: Interest must be accrued.)
Required:
1. Prepare the appropriate journal entry for each
transaction or event during 2021, as well as any adjusting entries
necessary at year end.
2. Indicate any amounts that Ornamental Insulation
would report in its 2021 income statement, 2021 statement of
comprehensive income, and 12/31/2021 balance sheet as a result of
these investments. Include totals for net income, comprehensive
income, and retained earnings as a result of these investments.
In: Accounting
The following selected transactions relate to investment
activities of Ornamental Insulation Corporation during 2021. The
company buys debt securities, intending to profit from short-term
differences in price and maintaining them in an active trading
portfolio. Ornamental’s fiscal year ends on December 31. No
investments were held by Ornamental on December 31, 2020.
| Mar. | 31 | Acquired 8% Distribution Transformers Corporation bonds costing $510,000 at face value. | ||
| Sep. | 1 | Acquired $1,230,000 of American Instruments' 10% bonds at face value. | ||
| Sep. | 30 | Received semiannual interest payment on the Distribution Transformers bonds. | ||
| Oct. | 2 | Sold the Distribution Transformers bonds for $590,000. | ||
| Nov. | 1 | Purchased $1,950,000 of M&D Corporation 6% bonds at face value. | ||
| Dec. | 31 | Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are |
| American Instruments bonds | $ | 1,181,000 | |
| M&D Corporation bonds | $ | 2,021,000 | |
(Hint: Interest must be accrued.)
Required:
1. Prepare the appropriate journal entry for each
transaction or event during 2021, as well as any adjusting entries
necessary at year end.
2. Indicate any amounts that Ornamental Insulation
would report in its 2021 income statement, 2021 statement of
comprehensive income, and 12/31/2021 balance sheet as a result of
these investments. Include totals for net income, comprehensive
income, and retained earnings as a result of these investments.
In: Accounting
The following selected transactions relate to investment
activities of Ornamental Insulation Corporation during 2021. The
company buys equity securities as noncurrent investments. None of
Ornamental’s investments are large enough to exert significant
influence on the investee. Ornamental’s fiscal year ends on
December 31. No investments were held by Ornamental on December 31,
2020.
| Mar. | 31 | Acquired Distribution Transformers Corporation common stock for $410,000. | ||
| Sep. | 1 | Acquired $915,000 of American Instruments' common stock. | ||
| Sep. | 30 | Received a $10,250 dividend on the Distribution Transformers common stock. | ||
| Oct. | 2 | Sold the Distribution Transformers common stock for $436,000. | ||
| Nov. | 1 | Purchased $1,410,000 of M&D Corporation common stock. | ||
| Dec. | 31 | Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: |
| American Instruments common stock | $ | 864,000 | |
| M&D Corporation common stock | $ | 1,471,000 | |
Required:
1. Prepare the appropriate journal entry for each
transaction or event during 2021, as well as any adjusting entries
necessary at year-end.
2. Indicate any amounts that Ornamental Insulation
would report in its 2021 income statement, 2021 statement of
comprehensive income, and 12/31/2021 balance sheet as a result of
these investments. Include totals for net income, comprehensive
income, and retained earnings as a result of these investments.
In: Accounting
The following selected transactions relate to investment
activities of Ornamental Insulation Corporation during 2021. The
company buys debt securities, intending to profit from short-term
differences in price and maintaining them in an active trading
portfolio. Ornamental’s fiscal year ends on December 31. No
investments were held by Ornamental on December 31, 2020.
| Mar. | 31 | Acquired 8% Distribution Transformers Corporation bonds costing $490,000 at face value. | ||
| Sep. | 1 | Acquired $1,170,000 of American Instruments' 10% bonds at face value. | ||
| Sep. | 30 | Received semiannual interest payment on the Distribution Transformers bonds. | ||
| Oct. | 2 | Sold the Distribution Transformers bonds for $560,000. | ||
| Nov. | 1 | Purchased $1,850,000 of M&D Corporation 6% bonds at face value. | ||
| Dec. | 31 |
Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are |
| American Instrument Bonds |
$1,129,000 |
| M&D Corporation Bonds | $1,919,000 |
(Hint: Interest must be accrued.)
Required:
1. Prepare the appropriate journal entry for each
transaction or event during 2021, as well as any adjusting entries
necessary at year end.
2. Indicate any amounts that Ornamental Insulation
would report in its 2021 income statement, 2021 statement of
comprehensive income, and 12/31/2021 balance sheet as a result of
these investments. Include totals for net income, comprehensive
income, and retained earnings as a result of these investments.
In: Accounting
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys equity securities as noncurrent investments. None of Ornamental’s investments are large enough to exert significant influence on the investee. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020.
| Mar. | 31 | Acquired Distribution Transformers Corporation common stock for $450,000. | ||
| Sep. | 1 | Acquired $975,000 of American Instruments' common stock. | ||
| Sep. | 30 | Received a $18,000 dividend on the Distribution Transformers common stock. | ||
| Oct. | 2 | Sold the Distribution Transformers common stock for $480,000. | ||
| Nov. | 1 | Purchased $1,450,000 of M&D Corporation common stock. | ||
| Dec. | 31 | Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: |
| American Instruments common stock | $ | 920,000 | |
| M&D Corporation common stock | $ | 1,515,000 | |
Required:
1. Prepare the appropriate journal entry for each
transaction or event during 2021, as well as any adjusting entries
necessary at year-end.
2. Indicate any amounts that Ornamental Insulation
would report in its 2021 income statement, 2021 statement of
comprehensive income, and 12/31/2021 balance sheet as a result of
these investments. Include totals for net income, comprehensive
income, and retained earnings as a result of these investments.
In: Accounting
The following selected transactions relate to investment
activities of Ornamental Insulation Corporation during 2021. The
company buys debt securities, intending to profit from short-term
differences in price and maintaining them in an active trading
portfolio. Ornamental’s fiscal year ends on December 31. No
investments were held by Ornamental on December 31, 2020.
| Mar. | 31 | Acquired 8% Distribution Transformers Corporation bonds costing $490,000 at face value. | ||
| Sep. | 1 | Acquired $1,170,000 of American Instruments' 10% bonds at face value. | ||
| Sep. | 30 | Received semiannual interest payment on the Distribution Transformers bonds. | ||
| Oct. | 2 | Sold the Distribution Transformers bonds for $560,000. | ||
| Nov. | 1 | Purchased $1,850,000 of M&D Corporation 6% bonds at face value. | ||
| Dec. | 31 | Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are |
| American Instruments bonds | $ | 1,129,000 | |
| M&D Corporation bonds | $ | 1,919,000 | |
(Hint: Interest must be accrued.)
Required:
1. Prepare the appropriate journal entry for each
transaction or event during 2021, as well as any adjusting entries
necessary at year end.
2. Indicate any amounts that Ornamental Insulation
would report in its 2021 income statement, 2021 statement of
comprehensive income, and 12/31/2021 balance sheet as a result of
these investments. Include totals for net income, comprehensive
income, and retained earnings as a result of these investments.
In: Accounting
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys equity securities as noncurrent investments. None of Ornamental’s investments are large enough to exert significant influence on the investee. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020.
Mar. 31 Acquired Distribution Transformers Corporation common stock for $480,000.
Sep. 1 Acquired $1,020,000 of American Instruments' common stock.
Sep. 30 Received a $19,200 dividend on the Distribution Transformers common stock.
Oct. 2 Sold the Distribution Transformers common stock for $513,000.
Nov. 1 Purchased $1,480,000 of M&D Corporation common stock.
Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are:
American Instruments common stock $ 962,000
M&D Corporation common stock $ 1,548,000
Required:
1. Prepare the appropriate journal entry for each transaction or
event during 2021, as well as any adjusting entries necessary at
year-end.
2. Indicate any amounts that Ornamental Insulation would report in
its 2021 income statement, 2021 statement of comprehensive income,
and 12/31/2021 balance sheet as a result of these investments.
Include totals for net income, comprehensive income, and retained
earnings as a result of these investments.
In: Accounting