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Homework Quiz—16 S11 Section 1

Homework Quiz—16 S11 Section 1 - Spring...

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Spring 2011 Section 1 Homework Quiz —16 Name Section ABC Company acquired put into service a depreciable asset at the beginning of 2009. The asset had a cost of $765,000, residual value of $70,000, and expected life of 5 years. At the beginning of 2011 ABC estimated that the remaining life of the asset was 8 years and residual value was $25,000. Required : 1. Calculate book value for the asset as of the beginning of 2011. $487,000 $765,000 – [($765,000 - $70,000) x 2/5] 2. Prepare an entry to record revised depreciation expense for 2011. Debit Credit Depreciation expense [($487,000 - $25,000)/8] 57,750 Accumulated depreciation 57,750 Required : 3. At the beginning of 2009, ABC Company rented a warehouse paying $300,000 for a four-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 2009 and 2010. ABC discovered the error at the beginning of 2011. Assume the tax rate is 40%. Prepare the journal entry at the beginning of 2011 to correct the error. Debit Credit Retained earnings ($150,000 x .60)
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