Question : 35) During 2011, Rob M. Clean Company recorded the following : 1253299

 

35) During 2011, Rob M. Clean Company recorded the following business events. For each, determine whether the accounting treatment was correct, and show the effect of any errors on the accounting equation.

 

Rob M. Clean:

 

Assets

 

Liabilities

Shareholders’ equity

 

 

 

CC

Retained earnings

1. recorded $5,000 of advertisements run in 2009 as expenses

___ overstated

___understated

___correctly stated

___ overstated

___understated

___correctly stated

 

___ overstated

___understated

___correctly stated

2. recorded $4,000 of installation costs

for new equipment

as an expense

___ overstated

___understated

___correctly stated

___ overstated

___understated

___correctly stated

 

___ overstated

___understated

___correctly stated

3. depreciates its

building over 20

years rather than 5

years, which is the

building’s estimated

useful life given the company’s growth

___ overstated

___understated

___correctly stated

___ overstated

___understated

___correctly stated

 

___ overstated

___understated

___correctly stated

 

 

 

36) On January 1, 2011. Hula Hoops, Inc. purchased a $40,000 machine for cash. The company uses straight-line depreciation, an estimated useful life of 5 years, and a $2,000 salvage value.

Treat each of the following scenarios independently. For each, write in the amount in the column that represents the one financial statement where the amount is found. Round your answers to the nearest whole dollar. The company’s yearend is December 31.

 

Part A: On December 31, 2011, the company was told by an appraiser that the machine is in such great condition it could be sold for $38,000.

As of or for the

year ended 2011:

Income

Statement

Statement of

Cash Flows

Balance

Sheet

1. Depreciation expense

 

 

 

2. Accumulated depreciation

 

 

 

3. Equipment (net)

 

 

 

4. Purchase of equipment

 

 

 

 

Part B: In December 2012, the company decided that the machine’s original estimated useful life of 5 years should be revised to a total of 8 years since the machine is in such good condition. Salvage value is still $2,000.

As of or for the

year ended 2012:

Income

Statement

Statement of

Cash Flows

Balance

Sheet

1. Depreciation expense

 

 

 

2. Accumulated depreciation

 

 

 

3. Equipment (net)

 

 

 

 

 

37) On January 1, 2011, Crunch Company paid $100,000 for equipment with an estimated useful life of 5 years and no residual value.

Part A: Calculate the financial statement amounts using each of the depreciation methods below:

 

2011 financial statement line items:

Straight-line

Double-declining balance

1. Depreciation expense

$

$

2. Accumulated depreciation

$

$

3. Equipment (net of accumulated

depreciation)

$

$

 

2012 financial statement line items:

Straight-line

Double-declining balance

4. Depreciation expense

$

$

5. Accumulated depreciation

$

$

6. Equipment (net of accumulated

depreciation)

$

$

 

Part B:

1. On January 1, 2013, Crunch Company sold the equipment for $62,000 cash. Assume straight-line depreciation was used. For each financial statement line item, write in the correct amount in the column that represents the financial statement where the information is found:

 

2013 financial statement line items:

Income

Statement

Statement of

Cash Flows

Balance Sheet

a. Proceeds from sale of equipment

 

 

 

b. Gain (loss) from sale of equipment

 

 

 

 

2.  Show the effect if the truck had been sold for $45,000 cash.

2013 financial statement line item:

Straight-line

Double-declining balance

Gain (loss) from sale of equipment

$

$

 

 

 

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