01 Jul journal entries for each below
DUE By 4/15/18 3 pm est
You are engaged in the audit of the financial statements of Holman Corporation for the year ended December 31, 20X6. The accompanying analyses of the Property, Plant, and Equipment and related accumulated depreciation accounts have been prepared by the chief accountant of the client. You have traced the beginning balances to your prior year’s audit working papers.
Analysis of Property, Plant, and Equipment
and Related Accumulated Depreciation Accounts
Year Ended December 31, 20X6
Description 12/31/X5 Additions Retirements 12/31/X6
Land $ 446,500 $ 6,600 $ 453,100
Buildings 136,000 25,500 161,500
Machinery and equipment 401,000 43,600 $ 32,500 412,100
$ 983,500 $ 75,700 $ 32,500 $ 1,026,700
Description 12/31/X5 Additions* Retirements 12/31/X6
Buildings $ 68,000 $ 5,950 $ 73,950
Machinery and equipment 180,450 42,325 222,775
$ 248,450 $ 48,275 $ 296,725
*Depreciation expense for the year.
All plant assets are depreciated on the straight-line basis (no residual value taken into consideration) based on the following estimated service lives: building, 25 years; and all other items, 10 years. The company’s policy is to take one half-year’s depreciation on all asset additions and disposals during the year.
Your audit revealed the following information:
On April 1, the company entered into a 10-year lease contract for a die casting machine, with annual rentals of $6,600 payable in advance every April 1. The lease is cancelable by either party (60 days’ written notice is required), and there is no option to renew the lease or buy the equipment at the end of the lease. The estimated service life of the machine is 10 years with no residual value. The company recorded the die casting machine in the Machinery and Equipment account at $43,600, the present value at the date of the lease, and $2,180 applicable to the machine has been included in depreciation expense for the year.
The company completed the construction of a wing on the plant building on June 30. The service life of the building was not extended by this addition. The lowest construction bid received was $23,900, the amount recorded in the Buildings account. Company personnel constructed the addition at a cost of $20,800 (materials, $9,100; labor, $7,100; and overhead, $4,600).
On August 18, $6,600 was paid for paving and fencing a portion of land owned by the company and used as a parking lot for employees. The expenditure was charged to the Land account.
The amount shown in the machinery and equipment asset retirement column represents cash received on September 5 upon disposal of a machine purchased in July 20X2 for $60,000. The chief accountant recorded depreciation expense of $4,500 on this machine in 20X6.
Harbor City donated land and a building appraised at $260,000 and $560,000, respectively, to Holman Corporation for a plant. On September 1, the company began operating the plant. Since no costs were involved, the chief accountant made no entry for the above transaction.
Prepare the adjusting journal entries that you would propose at December 31, 20X6, to adjust the accounts for the above transactions. Disregard income tax implications. The accounts have not been closed. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field. Do not round any division. Round your answers to the nearest dollar amount.)
1.Record the entry to correct the April 1, 20X6 entry for the lease of a die casting machine under a ten-year, cancelable lease having no renewal or purchase option.
2. Record the entry to correct the June 30, 20X6 entry for the addition to the building and to correct depreciation.
3.Record the entry to correct the June 30, 20X6 entry for the paving and fencing of the parking lot, and to provide the depreciation thereon.
4.Record the entry to correct the September 5, 20X6 entry for the disposal of the machine and the depreciation thereon.
5. Record the entry for the appraised value of the land and building donated by Harbor City, and the depreciation of the building thereon.
Note: Enter debits before credits.
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