Kiely Company Inc. has buildings that cost $1,000,000, with accumu- lated depreciation of $600,000 and a carrying amount of $400
,000 on December 31, Year 1. On that date, Kiely Company determines that the market value for these buildings is $750,000. Kiely Company wishes to carry buildings on the Decem- ber 31, Year 1, balance sheet at a revalued amount. Under treatment 1, Kiely Com- pany would restate both the buildings account and accumulated depreciation on buildings such that the ratio of net carrying amount to gross carrying amount is 40 percent ($400,000/$1,000,000) and the net carrying amount is $750,000. To ac- complish this, the following journal entry would be made at December 31, Year 1:
Record the necessary journal entries for the elimination of accumulated depreciation and the entry to revalue the building.
Record the necessary journal entries for the elimination of accumulated depreciation and the entry to revalue the building.
1 answer:
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Answer:
$1,160
Explanation:
<em>Hie, I have attached the full question as an image below.</em>
The firm usually makes provision for certain amounts so as not to overstate their profits. This expected as it is prudent than reporting profits that might never occur. Provisions of Uncollectible accounts are examples of such amounts.
An increase in Uncollectible amount compared to the opening balance is treated as an Expense in the Income Statement whilst a decrease is treated as an Income.
For this question, we are told that Uncollectible accounts are determined by the percent-of-sales method to be 4% of credit sales. Thus calculation of the 2012 uncollectible-account expense is as follows :
Credit Sales - 2012 = $44,000
Beginning Balance in allowances = $600
Therefore,
Uncollectable Amount (2012) = Credit Sales x percent-of-sales
= $44,000 x 4%
= $1,760
The Uncollectable amount has increased by $1,160 ($1,760 - $600)
Conclusion :
The collectible-account expense for 2012 is $1,160
