Resources: Ch. 9 of Financial Accounting
Complete Problems P9-3A and P9-5A.
P9-3A On January 1, 2011, Pele Company purchased the following two machines for use in its production process.
Machine A: The cash price of this machine was $38,000. Related expenditures included:
sales tax $1,700, shipping costs $150, insurance during shipping $80, installation
and testing costs $70, and $100 of oil and lubricants to be used with the machinery
during its first year of operations. Pele estimates that the useful life of the machine is 5 years with a $5,000 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used.
Machine B: The recorded cost of this machine was $160,000. Pele estimates that the useful
life of the machine is 4 years with a $10,000 salvage value remaining at the end
of that time period.
and so on ....
P9-5A At December 31, 2011, Jimenez Company reported the following as plant assets
Land $ 4,000,000
Buildings $28,500,000
Less: Accumulated depreciation—buildings 12,100,000 16,400,000
Equipment 48,000,000
Less: Accumulated depreciation—equipment 5,000,000 43,000,000
Total plant assets $63,400,000
and so on ...
Instructions
(a) Journalize the above transactions.The company uses straight-line depreciation for buildings
and equipment.The buildings are estimated to have a 50-year life and no salvage value.The
equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation
on assets disposed of at the time of sale or retirement.
(b) Record adjusting entries for depreciation for 2012.
(c) Prepare the plant assets section of Jimenez’s balance sheet at December 31, 2012.
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