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ACT 6692 Mod 11 Assignment

ACT 6692 Mod 11 Assignment - ACT 6692 Module 11...

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ACT 6692 Module 11 – Assignment (Problems) 11-1—Plant asset accounting During 2006 and 2007, Gorman Corporation experienced several transactions involving plant assets. A number of errors were made in recording some of these transactions. For each item listed below, indicate the effect of the error (if any) in the blanks provided by using the following codes: O = Overstate; U = Understate; NE = No Effect If no error was made, write NE in each of the four columns. 2006 2007 Net Book Net Book Value of Value of Plant 2006 Plant 2007 Assets at Net Assets at Net Transaction 12/31/06 Income 12/31/07 Income 1. The cost of installing a new computer system in 2006 was not recorded in 2006. It was charged to expense in 2007. 2. In 2007 clerical workers were trained to use the new computer system at a cost of $15,000, which was erroneously capital-ized. The cost is to be written off over the expected life of the new computer system. 3. A major overhaul of factory machinery in 2006, which extended its useful life by 5 years, was charged to accumulated depreciation in 2006. 4. Interest cost qualifying for capitalization in 2006 was charged to interest expense in 2006. 5. In 2006 land was bought for an employee parking lot. The $2,000 title search fee was charged to expense in 2006. 6. The cost of moving several manufacturing facilities from metropolitan locations to suburban areas in 2006 was capitalized. The cost was written off over a 10-year period beginning in 2006. ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
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11-2—Nonmonetary exchange A machine cost $80,000, has annual depreciation expense of $16,000, and has accumulated depreciation of $40,000 on December 31, 2006. On April 1, 2007, when the machine has a fair value of $32,000, it is exchanged for a similar machine with a fair value of $96,000 and the proper amount of cash is paid. The exchange lacked commercial substance. Instructions Prepare all entries that are necessary at April 1, 2007. 11-3—Donated assets Perez Company has recently decided to accept a proposal from the City of Bel Aire that publicly owned property with a large warehouse located on it will be donated to Perez if Perez will build a branch plant in Bel Aire. The appraised value of the property is $490,000 and of the warehouse is $980,000. Instructions Prepare the entry by Perez for the receipt of the properties. 11-4—Capitalizing vs. Expensing Consider each of the items below. Place the proper letter in the blank space provided to indicate the nature of the account or accounts to be debited when recording each transaction using the preferred accounting treatment. Prepayments should be recorded in balance sheet accounts.
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ACT 6692 Mod 11 Assignment - ACT 6692 Module 11...

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