Chapter 16 Problem 16-24
1. Discount on bonds payable 500,000
Machinery 500,000
Interest expense (500,000 / 10 x 9/12) 37,500
Discount on bonds payable 37,500
Accumulated depreciation 75,000
Depreciation 75,000
Depreciation for 9 months 600,000
Depreciation for 12 months (600,000 / 9/12) 800,000
Depreciable cost (800,000 x 5 years) 4,000,000
Per book Adjusted
Cost 5,000,000 4,500,000
Less: Residual value 1,000,000 1,000,000
Depreciable cost 4,000,000 3,500,000
Correct depreciation for 9 months (3,500,000 / 5 x 9/12) 525,000
Less: Depreciation recorded 600,000
Overstatement 75,000
2. Interest expense 300,000
Machinery (3,500,000 – 3,200,000) 300,000
Machinery 150,000
Freight in 150,000
Accumulated depreciation 30,000
Depreciation 30,000
Depreciation per book 700,000
Correct depreciation (3,350,000 / 5) 670,000
Overstatement 30,000
3. Loss on exchange 390,000
Machinery 390,000
Cost per book 3,000,000
Correct cost
Trade in value 150,000
Add: Cash paid 2,460,000 2,610,000
Overstatement 390,000
Trade in value 150,000
Less: Book value 540,000
Loss on exchange (390,000)
4. Allowance for doubtful accounts 840,000
Loss on exchange – accounts receivable 60,000
Treasury share 900,000
Per book
Machinery 4,200,000
Accounts receivable 4,200,000
Treasury shares 4,200,000
Machinery 4,200,000
Should be
Machinery 3,300,000
Allowance for doubtful accounts (20% x 4,200,000) 840,000
Loss on accounts receivable 60,000
Accounts receivable 4,200,000
Treasury shares 3,300,000
Machinery 3,300,000
The cost of treasury shares acquired for noncash consideration is usually measured by the recorded amount of the noncash asset surrendered (SFAS No. 18).
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