As part of the initial investment, Ray Blake contributes equipment that had originally cost $96,200 and on which accumulated depreciation of $72,150 has been recorded. If similar equipment would cost $159,500 to replace and the partners agree on a valuation of $49,300 for the contributed equipment, what amount should be debited to the equipment account? a.$96,200 b.$159,500 c.$36,975 d.$49,300
As part of the initial investment, Ray Blake contributes equipment that had originally cost $96,200 and on which accumulated depreciation of $72,150 has been recorded. If similar equipment would cost $159,500 to replace and the partners agree on a valuation of $49,300 for the contributed equipment, what amount should be debited to the equipment account? a.$96,200 b.$159,500 c.$36,975 d.$49,300
Related questions
Prepare the journal entries for the disposal of plant assets in each of the separate transactions.
Brown Company purchased equipment in 2008 for $150,000 and estimated a $10,000 salvage value at the end of the equipment's 10-year useful life. At December 31, 2014, there was $98,000 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31, 2015, the equipment was sold for $40,000.
| Date | Account Titles | Ref. | Debit | Credit |
Finney Company sold a machine for $15,000. The machine originally cost $35,000 in 2012 and $8,000 was spent on a major overhaul in 2015 (charged to the Equipment account). Accumulated Depreciation on the machine to the date of disposal was $28,000.
| Date | Account Titles | Ref. | Debit | Credit |
Stanley Company sold office equipment that had a book value of $12,000 for $16,000. The office equipment originally cost $40,000 and it is estimated that it would cost $50,000 to replace the office equipment.
| Date | Account Titles | Ref. | Debit | Credit |
Problem 22-7
You have been assigned to examine the financial statements of Ayayai Company for the year ended December 31, 2017. You discover the following situations.
| 1. | Depreciation of $2,900 for 2017 on delivery vehicles was not recorded. | |
| 2. | The physical inventory count on December 31, 2016, improperly excluded merchandise costing $19,300 that had been temporarily stored in a public warehouse. Ayayai uses a periodic inventory system. | |
| 3. | A collection of $5,400 on account from a customer received on December 31, 2017, was not recorded until January 2, 2018. | |
| 4. | In 2017, the company sold for $3,500 fully depreciated equipment that originally cost $23,200. The company credited the proceeds from the sale to the Equipment account. | |
| 5. | During November 2017, a competitor company filed a patent-infringement suit against Ayayai claiming damages of $229,100. The companyâs legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the courtâs award to the competitor is $136,900. The company has not reflected or disclosed this situation in the financial statements. | |
| 6. | Ayayai has a portfolio of trading investments. No entry has been made to adjust to market. Information on cost and fair value is as follows. |
| Cost | Fair Value | |||
| December 31, 2016 | $88,700 | $88,700 | ||
| December 31, 2017 | $86,400 | $84,500 |
| 7. | At December 31, 2017, an analysis of payroll information shows accrued salaries of $12,700. The Salaries and Wages Payable account had a balance of $16,000 at December 31, 2017, which was unchanged from its balance at December 31, 2016. | |
| 8. | A large piece of equipment was purchased on January 3, 2017, for $42,600 and was charged to Maintenance and Repairs Expense. The equipment is estimated to have a service life of 8 years and no residual value. Ayayai normally uses the straight-line depreciation method for this type of equipment. | |
| 9. | A $13,200 insurance premium paid on July 1, 2016, for a policy that expires on June 30, 2019, was charged to insurance expense. | |
| 10. | A trademark was acquired at the beginning of 2016 for $47,200. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years. |
Assume the trial balance has been prepared but the books have not been closed for 2017. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
