For each separate case, record an adjusting entry (if necessary). Barga Company purchases $32,000 of equipment on January 1. The
equipment is expected to last five years and be worth $4,400 at the end of that time. Welch Company purchases $11,200 of land on January 1. The land is expected to last forever. Prepare the entries to record one year’s depreciation expense of $5,520 for the equipment and what depreciation adjustment, if any, should be made with respect to the Land account as of December 31? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Equipment can be depreciated and the journal entry would be:
December 31, 202x, depreciation expense
Dr Depreciation expense 5,520
Cr Accumulated depreciation - equipment 5,520
Accumulated depreciation is a contra asset account that decreases the net value of a fixed asset.
On the other hand, land cannot be depreciated. Land must always be reported at its historical cost (purchase price) even if its fair market value increases or decreases over time.
Explanation:Groupthink is a phenomenon that occurs when the desire for group consensus overrides people's common sense desire to present alternatives, critique a position, or express an unpopular opinion. Here, the desire for group cohesion effectively drives out good decision-making and problem solving.
Groupthink is the name given to a theory or model that was extensively developed by Irving Janis (1972) to describe faulty decision making .
Option B is wrong because $1,035 is the dividend received from the company by Elizabeth.
Option C is wrong because $270 is the current market price of each share.
Option D is incorrect because $10,350 is the common stock value of 115 shares.
Option A is correct because $90 is Elizabeth's per-share basis in the company for which she received a dividend. Share's price increased to $270 after success.
Since the cost of $20,000 has been incurred two years ago, the firm should check and see as to how many units of the product were produced in the two years. Did the firm produce enough items to break even the cost of acquisition. Additionally the business should also check the current market value of this two year old equipment. The business manager should weigh in the savings that is to be obtained from outsourcing along with the resale value of the old machine and then take a declension as to whether the company should go for outsourcing. Also, the business manager must examine whether the outsourcing can happen for the long run. This is because two years down the line, outsourcing may have increased the cost and again another process may look attractive. So a through cost benefit analysis should be made before taking a decision.
