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"03-19-Homework Quiz—14

"03-19-Homework Quiz—14

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Homework Quiz—14 Name Section ABC Company acquired put into service a depreciable asset at the beginning of 2006. The asset had a cost of $600,000, residual value of $50,000, and expected life of 8 years. At the beginning of 2009 ABC estimated that the remaining life of the asset was 10 years and residual value was $75,000. Required : 1. Calculate book value for the asset as of the beginning of 2009. $393,750 $600,000 – [($600,000 - $50,000) x 3/8] 2. Prepare an entry to record revised depreciation expense for 2009. Debit Credit Depreciation expense [($393,750 - $75,000)/10] 31,875 Accumulated depreciation 31,875 Required : 3. At the beginning of 2008, ABC Company rented a warehouse paying $300,000 for a three-year operating lease. At the time the lease was signed ABC debited prepaid rent and credited cash $300,000. ABC forgot to record rent expense and the reduction of prepaid rent for this lease for 2008 and 2009. ABC discovered the error at the beginning of 2010. Assume the tax rate is 40%. Prepare the journal entry at the beginning of 2010 to correct the error. Debit Credit Retained earnings ($200,000 x .60)
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