Equipment with an original cost of $65,000 and accumulated depreciation of $52,0
ID: 2456706 • Letter: E
Question
Equipment with an original cost of $65,000 and accumulated depreciation of $52,000 was deemed unusable and was sold for $500 scrap value. A new machine was acquired for $75,700. The invoice was marked 2/10, n/30, but McNally did not pay in time to take advantage of the 2% discount for early payment and thus paid the gross amount of $75,700. Wiring was improved to accommodate the needs of the new machinery at a cost of $500. Related software to install in the machine required for operation was purchased for $3,000. Installation and testing of the new machinery cost $2,500. Regular machine maintenance was carried out for $22,000. A major overhaul was done on heavy machinery for a cost of $75,000. This overhaul is expected to be completed every five years. The building roof was replaced during the period at a cost of $44,800 to improve the insulation in the building and save on heating costs. The old roof had an original cost of $20,400 and was three-quarters depreciated. Two machines were acquired for a lump-sum amount of $53,800. One machine had an appraised value of $40,000 and the other, $20,000. Land and building were acquired from a member of the Board of Directors in exchange for 325,000 of the company's own common shares. The land was appraised at $75,000 and the building, $400,000. The facility will be used for long-term storage. The market value of common shares has been around $1.25 per share this year, with weekly highs and lows ranging from $1.80 to $0.95, respectively. The company spent $630,000 in a research lab program this year. It was successful in developing three new commercial projects, which represented $244,000 of the expenditures budget. Legal fees associated with the three successful projects amount to $55,000. McNally paved its factory parking lot, previously a dirt lot, at a cost of $160,100. Prepare journal entries to record the transactions listed above. State any assumptions made.Explanation / Answer
Mc Nally corporation Journal Entries for 20X2 sr no Account title Dr $ Cr $ a Equipment 65,000 Accumulated Depreciation 52,000 Cash 500 Loss on Disposal of Capital Assets 12,500 b Equipment 75,700 Cash 75,700 Equipment 500 Cash 500 (wiring cost capitalized) Equipment 3,000 Cash 3,000 (software capitalized) Equipment 2,500 Cash 2,500 (installation cost captalized) c Cash 22,000 Repair & Manitenance Expense 22,000 d Equipment 75,000 Cash 75,000 (capitalized as major overhaul and less frequent) e Building 44,800 Cash 44,800 ( capitalized as it is improvement) Building 20,400 Accumulated Depreciation-Building 15,300 Loss on disposal of Capital Asset 5,100 ( old roof removed from book assuming no salvage value) f Equipment 35,867 Equipment 17,933 Cash 53,800 ( Equipments capitalized at acquisition cost in ratio of their apprised value) g Land 75,000 Building 400,000 Common Stock 325,000 Additional Paid in Capital in Execss of Par-common stock 150,000 (assumed par value $1 share issued against the assets) h Research expense 630,000 Cash 630,000 Intangible Assets 244,000 Research expense 244,000 Legal Expenses 55,000 Intangible Assets 55,000 i Land Improvement 160,100 Cash 160,100
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.