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ki77a [65]
3 years ago
9

In 2021, it was discovered that Hines 55 had debited expense for the full cost of an asset purchased on January 1, 2018. The cos

t was $24 million with no expected residual value. Its useful life was 5 years and straight-line depreciation is used by the company. The correcting entry assuming the error was discovered in 2021 before the adjusting and closing entries includes:a.A credit to accumulated depreciation of $14.4 millionb.A debit to accumulated depreciation of $9.6 millionc.A debit to retained earnings of $9.6 milliond.A credit to an asset of $24 million
Business
1 answer:
Brut [27]3 years ago
5 0

Answer:

A) A credit to accumulated depreciation of $14.4 Million

Explanation:

The complete journal entry should be:

  • Dr Asset XXX account 24,000,000
  • Cr Accumulated Depreciation account 14,400,000
  • Cr Retained Earnings account 9,600,000

First of all the asset must be recorded at full value.

Accumulated depreciation would be credited for 3 years = ($24 / 5) x 3 = $4.8 x = $14.4

Since the depreciation expense lowered the net profits during 2018, the retained earnings must be adjusted for the remaining value = $24 - $14.4 = $9.8

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On June 1, 2018, Blue Co. distributed to its common stockholders 180,000 outstanding common shares of its investment in Red, Inc
faltersainse [42]

Answer:

Blue Co. Shall report $396,000 as gain before income taxes on disposal of the stock.

Explanation:

Book value per share of Red Inc = $1.20 per share

As the value of share is revised just after the declaration but before distribution there will be gain on sale of investment.

Net gain = Sale price - Book value

= $3.40 - $1.20 per share = $2.2 per share

Total gain for the year end on June 30 will be

= $2.2 per share X 180,000 shares = $396,000 shares

Thus Blue Co. Shall report $396,000 as gain before income taxes on disposal of the stock.

8 0
2 years ago
​enrique borrowed $3600 to put a down payment on a motorcycle. the loan had a simple interest rate of 8% for 2 years. use the fo
Rudik [331]

Answer:

The amount of interest is $576.

Step by step explanation :

Given : ​Enrique borrowed $3600 to put a down payment on a motorcycle. The loan had a simple interest rate of 8% for 2 years.

To find : The amount of interest he will pay on the loan.

Solution : Using the formula,

I=P\times R\times T

Where, I= Interest , P=principal , R= rate, T=time in years

We have given that :

P=$3600

R=8%=0.08

T=2 years

Substitute value in the formula to find interest,

I=P\times R\times T

I=3600\times 0.08\times 2

I=576

Therefore, The amount of interest is $576.

6 0
3 years ago
Exercise 118 The information shown below is taken from the accounts of Waverly Corporation for the year ended December 31, 2017.
devlian [24]

Answer:

Explanation:

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $314,000

Adjustment made:

Add : Depreciation expense $55,000

Add:  Amortization of patent $12,000

Less: Gain on sale of building -$15,000

Add: Loss on sale of land $5,000

Add: Decrease in accounts receivable $23,000

Add: Increase in short-term notes payable $8,000

Add: Decrease in inventory $27,000

Less: Decrease in accounts payable -15,000

Total of Adjustments $100,000

Net Cash flow from Operating activities              $414,000

Cash flow from Investing activities  

Sale of building $85,000

Less: Purchase of equipment -$185,000

Sale of land $40,000

Less: Purchase of delivery van -$33,000

Net Cash flow from Investing activities -$93,000

Cash flow from Financing activities  

Proceeds from issuance of common stock $103,000

Less: Payment of cash dividends -$24,000

Less: Payment of mortgage -$75,000

Net Cash flow from Financing activities $4,000

Net Cash flow from Operating activities $414,000

Net Cash flow from Investing activities -$93,000

Net Cash flow from Financing activities $4,000

Net increase (decrease) in cash for the year is $325,000

Add: Cash at beginning of year $205,000

Ending cash balance $530,000

5 0
2 years ago
Explain how a firm's production function is related to its marginal product of labor, how a firm's marginal product of labor is
Ghella [55]

The price paid to each factor adjusts to balance the supply and demand for that factor. Because factor demand reflects the value of the marginal product of that factor, in equilibrium, each factor is compensated according to its marginal contribution to the production of goods and services.

<h3><u>Explanation:</u></h3>

The incremental profit that is being earned for an additional single unit by subtracting the price of the product and all the variable cost that is associated with that product is the marginal contribution. It is the earnings that is obtained in total for paying all fixed expense and also for the profit generation.

The price that is spent for the every factor in order to adjust balancing the supply and demand of that particular factor. This is because of the reason that, the value of the marginal product of any factor is controlled by the demand factor. Thus in an equilibrium state there will be a compensation of each factor based on the marginal contribution to the production of goods and services.

7 0
3 years ago
Which of the following must be true in order for materials to be classified as direct materials? a.They must be an integral part
zaharov [31]

Answer:

a.They must be an integral part of the finished product and be a significant portion of the total product cost

Explanation:

The direct material is the material cost which is directly related to the process of the product at the time of manufacturing the product

It can be an integral part of the finished goods as finished goods are come from direct materials and the work in process cycles.

Moreover, it also included in the total product cost along with the direct labor cost and the manufacturing overhead cost

7 0
3 years ago
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