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ACC 291 WileyPLUS Assignment: Week 2 Assignment
Resource: WileyPLUS
Complete the following Week 2 Assignment in WileyPLUS:
• Problem 8-3A
• Brief Exercise 9-11
• DO IT! 9-5
• Exercise 9-7
• Exercise 9-8
• BYP 9-1
• BYP 9.2
• Problem 9-2A
Brief Exercise 9-11
Suppose Nike, Inc. reported the following plant assets and intangible assets for the year ended May 31, 2014 (in millions): other plant assets $937.7; land $241.9; patents and trademarks (at cost) $537.8; machinery and equipment $2,185.8; buildings $958; goodwill (at cost) $175.6; accumulated amortization $53.2; and accumulated depreciation $2,195.
Prepare a partial balance sheet for Nike for these items. (List Property, Plant and Equipment in order of Land, Buildings and Equipment.)
NIKE, INC.
Partial Balance Sheet
As of May 31, 2014
(in millions)
Do It! Review 9-5
Your answer is correct.
Match the statement with the term most directly associated with it.
1.
Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance.
2.
The allocation of the cost of an intangible asset to expense in a rational and systematic manner.
3.
A right to sell certain products or services, or use certain trademarks or trade names within a designated geographic area.
4.
Costs incurred by a company that often lead to patents or new products. These costs must be expensed as incurred.
5.
The excess of the cost of a company over the fair value of the net assets required.
Exercise 9-7
Your answer is correct.
Wang Co. has delivery equipment that cost $56,840 and has been depreciated $23,520.
Record entries for the disposal under the following assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(a) It was scrapped as having no value.
(b) It was sold for $37,330.
(c) It was sold for $18,850.
Exercise 9-8
Your answer is correct.
Here are selected 2014 transactions of Cleland Corporation.
Jan. 1 Retired a piece of machinery that was purchased on January 1, 2004. The machine cost $61,550 and had a useful life of 10 years with no salvage value.
June 30 Sold a computer that was purchased on January 1, 2012. The computer cost $36,600 and had a useful life of 4 years with no salvage value. The computer was sold for $4,460 cash.
Dec. 31 Sold a delivery truck for $9,170 cash. The truck cost $23,710 when it was purchased on January 1, 2011, and was depreciated based on a 5-year useful life with a $3,550 salvage value.
Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Cleland Corporation uses straight-line depreciation. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Broadening Your Perspective 9-1
The financial statements of Tootsie Roll are presented below.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)
For the year ended December 31,
2011 2010 2009
Net product sales $528,369 $517,149 $495,592
Rental and royalty revenue 4,136 4,299 3,739
Total revenue 532,505 521,448 499,331
Product cost of goods sold 365,225 349,334 319,775
Rental and royalty cost 1,038 1,088 852
Total costs 366,263 350,422 320,627
Product gross margin 163,144 167,815 175,817
Rental and royalty gross margin 3,098 3,211 2,887
Total gross margin 166,242 171,026 178,704
Selling, marketing and administrative expenses 108,276 106,316 103,755
Impairment charges — — 14,000
Earnings from operations 57,966 64,710 60,949
Other income (expense), net 2,946 8,358 2,100
Earnings before income taxes 60,912 73,068 63,049
Provision for income taxes 16,974 20,005 9,892
Net earnings $43,938 $53,063 $53,157
Net earnings $43,938 $53,063 $53,157
Other comprehensive earnings (loss) (8,740 ) 1,183 2,845
Comprehensive earnings $35,198 $54,246 $56,002
Retained earnings at beginning of year. $135,866 $147,687 $144,949
Net earnings 43,938 53,063 53,157
Cash dividends (18,360 ) (18,078 ) (17,790 )
Stock dividends (47,175 ) (46,806 ) (32,629 )
Retained earnings at end of year $114,269 $135,866 $147,687
Earnings per share $0.76 $0.90 $0.89
Average Common and Class B Common shares outstanding 57,892 58,685 59,425
(The accompanying notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
Assets December 31,
2011 2010
CURRENT ASSETS:
Cash and cash equivalents $78,612 $115,976
Investments 10,895 7,996
Accounts receivable trade, less allowances of $1,731 and $1,531 41,895 37,394
Other receivables 3,391 9,961
Inventories:
Finished goods and work-in-process 42,676 35,416
Raw materials and supplies 29,084 21,236
Prepaid expenses 5,070 6,499
Deferred income taxes 578 689
Total current assets 212,201 235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 21,939 21,696
Buildings 107,567 102,934
Machinery and equipment 322,993 307,178
Construction in progress 2,598 9,243
455,097 440,974
Less—Accumulated depreciation 242,935 225,482
Net property, plant and equipment 212,162 215,492
OTHER ASSETS:
Goodwill 73,237 73,237
Trademarks 175,024 175,024
Investments 96,161 64,461
Split dollar officer life insurance 74,209 74,441
Prepaid expenses 3,212 6,680
Equity method investment 3,935 4,254
Deferred income taxes 7,715 9,203
Total other assets 433,493 407,300
Total assets $857,856 $857,959
Liabilities and Shareholders’ Equity December 31,
2011 2010
CURRENT LIABILITIES:
Accounts payable $10,683 $9,791
Dividends payable 4,603 4,529
Accrued liabilities 43,069 44,185
Total current liabilities 58,355 58,505
NONCURRENT LIABILITES:
Deferred income taxes 43,521 47,865
Postretirement health care and life insurance benefits 26,108 20,689
Industrial development bonds 7,500 7,500
Liability for uncertain tax positions 8,345 9,835
Deferred compensation and other liabilities 48,092 46,157
Total noncurrent liabilities 133,566 132,046
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares authorized—36,479 and 36,057 respectively, issued 25,333 25,040
Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 and 20,466 respectively, issued 14,601 14,212
Capital in excess of par value 533,677 505,495
Retained earnings, per accompanying statement 114,269 135,866
Accumulated other comprehensive loss (19,953 ) (11,213 )
Treasury stock (at cost)—71 shares and 69 shares, respectively (1,992 ) (1,992 )
Total shareholders’ equity 665,935 667,408
Total liabilities and shareholders’ equity $857,856 $857,959
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)
For the year ended December 31,
2011 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $43,938 $53,063 $53,157
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation 19,229 18,279 17,862
Impairment charges — — 14,000
Impairment of equity method investment — — 4,400
Loss from equity method investment 194 342 233
Amortization of marketable security premiums 1,267 522 320
Changes in operating assets and liabilities:
Accounts receivable (5,448 ) 717 (5,899 )
Other receivables 3,963 (2,373 ) (2,088 )
Inventories (15,631 ) (1,447 ) 455
Prepaid expenses and other assets 5,106 4,936 5,203
Accounts payable and accrued liabilities 84 2,180 (2,755 )
Income taxes payable and deferred (5,772 ) 2,322 (12,543 )
Postretirement health care and life insurance benefits 2,022 1,429 1,384
Deferred compensation and other liabilities 2,146 2,525 2,960
Others (708 ) 310 305
Net cash provided by operating activities 50,390 82,805 76,994
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (16,351 ) (12,813 ) (20,831 )
Net purchase of trading securities (3,234 ) (2,902 ) (1,713 )
Purchase of available for sale securities (39,252 ) (9,301 ) (11,331 )
Sale and maturity of available for sale securities 7,680 8,208 17,511
Net cash used in investing activities (51,157 ) (16,808 ) (16,364 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares repurchased and retired (18,190 ) (22,881 ) (20,723 )
Dividends paid in cash (18,407 ) (18,130 ) (17,825 )
Net cash used in financing activities (36,597 ) (41,011 ) (38,548 )
Increase (decrease) in cash and cash equivalents (37,364 ) 24,986 22,082
Cash and cash equivalents at beginning of year 115,976 90,990 68,908
Cash and cash equivalents at end of year $78,612 $115,976 $90,990
Supplemental cash flow information
Income taxes paid $16,906 $20,586 $22,364
Interest paid $38 $49 $182
Stock dividend issued $47,053 $46,683 $32,538
(The accompanying notes are an integral part of these statements.)
Notes to Consolidated Financial Statements ($ in thousands)
PROPERTY, PLANT AND EQUIPMENT:
Depreciation is computed for financial reporting purposes by use of the straight-line method based on the useful lives of 20 to 35 years for building and 5 to 25 years for machinery and equipment. Depreciation expenses was $19,229, $18,279 and $17,862 in 2011, 2010 and 2009, respectively.
Goodwill and intangible assets:
In accordance with authoritative guidance, goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually unless certain interim triggering events or circumstances require more frequent testing. All trademarks have been assessed by management to have indefinite lives because they are expected to generate cash flows indefinitely. The Company has completed its annual impairment testing of its goodwill and trademarks at December 31 of each of the years presented. As of December 31, 2009, management ascertained that certain trademarks were impaired, and recorded a pre-tax charge of $14,000. No impairments of intangibles were recorded in 2011 and 2010. This determination is made by comparing the carrying value of the asset with its estimated fair value, which is calculated using estimates including discounted projected future cash flows. If the carrying value of goodwill exceeds the fair value, a second step would measure the carrying value and implied fair value of goodwill. Management believes that all assumptions used for the impairment tests are consistent with those utilized by market participants performing similar valuations.
Answer the following questions.
Broadening Your Perspective 9-2
Your answer is correct.
The financial statements of The Hershey Company and Tootsie Roll are presented below.
THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 2011 2010 2009
In thousands of dollars except per share amounts
Net Sales $6,080,788 $5,671,009 $5,298,668
Costs and Expenses:
Cost of sales 3,548,896 3,255,801 3,245,531
Selling, marketing and administrative 1,477,750 1,426,477 1,208,672
Business realignment and impairment (credits) charges, net (886 ) 83,433 82,875
Total costs and expenses 5,025,760 4,765,711 4,537,078
Income before Interest and Income Taxes 1,055,028 905,298 761,590
Interest expense, net 92,183 96,434 90,459
Income before Income Taxes 962,845 808,864 671,131
Provision for income taxes 333,883 299,065 235,137
Net Income $628,962 $509,799 $435,994
Net Income Per Share—Basic—Class B Common Stock $2.58 $2.08 $1.77
Net Income Per Share—Diluted—Class B Common Stock $2.56 $2.07 $1.77
Net Income Per Share—Basic—Common Stock $2.85 $2.29 $1.97
Net Income Per Share—Diluted—Common Stock $2.74 $2.21 $1.90
Cash Dividends Paid Per Share:
Common Stock $1.3800 $1.2800 $1.1900
Class B Common Stock 1.2500 1.1600 1.0712
The notes to consolidated financial statements are an integral part of these statements and are included in the Hershey’s 2011 Annual Report, available at www.thehersheycompany.com.
THE HERSHEY COMPANY
CONSOLIDATED BALANCE SHEETS
December 31, 2011 2010
In thousands of dollars
ASSETS
Current Assets:
Cash and cash equivalents $693,686 $884,642
Accounts receivable—trade 399,499 390,061
Inventories 648,953 533,622
Deferred income taxes 136,861 55,760
Prepaid expenses and other 167,559 141,132
Total current assets 2,046,558 2,005,217
Property, Plant and Equipment, Net 1,559,717 1,437,702
Goodwill 516,745 524,134
Other Intangibles 111,913 123,080
Deferred Income Taxes 38,544 21,387
Other Assets 138,722 161,212
Total assets $4,412,199 $4,272,732
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $420,017 $410,655
Accrued liabilities 612,186 593,308
Accrued income taxes 1,899 9,402
Short-term debt 42,080 24,088
Current portion of long-term debt 97,593 261,392
Total current liabilities 1,173,775 1,298,845
Long-term Debt 1,748,500 1,541,825
Other Long-term Liabilities 617,276 494,461
Total liabilities 3,539,551 3,335,131
Commitments and Contingencies — —
Stockholders’ Equity:
The Hershey Company Stockholders’ Equity
Preferred Stock, shares issued: none in 2011 and 2010 — —
Common Stock, shares issued: 299,269,702 in 2011 and 299,195,325 in 2010 299,269 299,195
Class B Common Stock, shares issued: 60,632,042 in 2011 and 60,706,419 in 2010 60,632 60,706
Additional paid-in capital 490,817 434,865
Retained earnings 4,699,597 4,374,718
Treasury—Common Stock shares, at cost: 134,695,826 in 2011 and 132,871,512 in 2010 (4,258,962 ) (4,052,101 )
Accumulated other comprehensive loss (442,331 ) (215,067 )
The Hershey Company stockholders’ equity 849,022 902,316
Noncontrolling interests in subsidiaries 23,626 35,285
Total stockholders’ equity 872,648 937,601
Total liabilities and stockholders’equity $4,412,199 $4,272,732
THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2011 2010 2009
In thousands of dollars
Cash Flows Provided from (Used by) Operating Activities
Net income $628,962 $509,799 $435,994
Adjustments to reconcile net income to net cash provided from operations:
Depreciation and amortization 215,763 197,116 182,411
Stock-based compensation expense, net of tax of $15,127, $17,413 and $19,223, respectively 28,341 32,055 34,927
Excess tax benefits from stock-based compensation (13,997 ) (1,385 ) (4,455 )
Deferred income taxes 33,611 (18,654 ) (40,578 )
Gain on sale of trademark licensing rights, net of tax of $5,962 (11,072 ) — —
Business realignment and impairment charges, net of tax of $18,333, $20,635 and $38,308, respectively 30,838 77,935 60,823
Contributions to pension plans (8,861 ) (6,073 ) (54,457 )
Changes in assets and liabilities, net of effects from business acquisitions and divestitures:
Accounts receivable—trade (9,438 ) 20,329 46,584
Inventories (115,331 ) (13,910 ) 74,000
Accounts payable 7,860 90,434 37,228
Other assets and liabilities (205,809 ) 13,777 293,272
Net Cash Provided from Operating Activities 580,867 901,423 1,065,749
Cash Flows Provided from (Used by) Investing Activities
Capital additions (323,961 ) (179,538 ) (126,324 )
Capitalized software additions (23,606 ) (21,949 ) (19,146 )
Proceeds from sales of property, plant and equipment 312 2,201 10,364
Proceeds from sales of trademark licensing rights 20,000 — —
Business acquisitions (5,750 ) — (15,220 )
Net Cash (Used by) Investing Activities (333,005 ) (199,286 ) (150,326 )
Cash Flows Provided from (Used by) Financing Activities
Net change in short-term borrowings 10,834 1,156 (458,047 )
Long-term borrowings 249,126 348,208 —
Repayment of long-term debt (256,189 ) (71,548 ) (8,252 )
Proceeds from lease financing agreement 47,601 — —
Cash dividends paid (304,083 ) (283,434 ) (263,403 )
Exercise of stock options 184,411 92,033 28,318
Excess tax benefits from stock-based compensation 13,997 1,385 4,455
Contributions from noncontrolling interests in subsidiaries — 10,199 7,322
Repurchase of Common Stock (384,515 ) (169,099 ) (9,314 )
Net Cash (Used by) Financing Activities (438,818 ) (71,100 ) (698,921 )
(Decrease) Increase in Cash and Cash Equivalents (190,956 ) 631,037 216,502
Cash and Cash Equivalents as of January 1 884,642 253,605 37,103
Cash and Cash Equivalents as of December 31 $693,686 $884,642 $253,605
Interest Paid $97,892 $97,932 $91,623
Income Taxes Paid 292,315 350,948 252,230
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)
For the year ended December 31,
2011 2010 2009
Net product sales $528,369 $517,149 $495,592
Rental and royalty revenue 4,136 4,299 3,739
Total revenue 532,505 521,448 499,331
Product cost of goods sold 365,225 349,334 319,775
Rental and royalty cost 1,038 1,088 852
Total costs 366,263 350,422 320,627
Product gross margin 163,144 167,815 175,817
Rental and royalty gross margin 3,098 3,211 2,887
Total gross margin 166,242 171,026 178,704
Selling, marketing and administrative expenses 108,276 106,316 103,755
Impairment charges — — 14,000
Earnings from operations 57,966 64,710 60,949
Other income (expense), net 2,946 8,358 2,100
Earnings before income taxes 60,912 73,068 63,049
Provision for income taxes 16,974 20,005 9,892
Net earnings $43,938 $53,063 $53,157
Net earnings $43,938 $53,063 $53,157
Other comprehensive earnings (loss) (8,740 ) 1,183 2,845
Comprehensive earnings $35,198 $54,246 $56,002
Retained earnings at beginning of year. $135,866 $147,687 $144,949
Net earnings 43,938 53,063 53,157
Cash dividends (18,360 ) (18,078 ) (17,790 )
Stock dividends (47,175 ) (46,806 ) (32,629 )
Retained earnings at end of year $114,269 $135,866 $147,687
Earnings per share $0.76 $0.90 $0.89
Average Common and Class B Common shares outstanding 57,892 58,685 59,425
(The accompanying notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
Assets December 31,
2011 2010
CURRENT ASSETS:
Cash and cash equivalents $78,612 $115,976
Investments 10,895 7,996
Accounts receivable trade, less allowances of $1,731 and $1,531 41,895 37,394
Other receivables 3,391 9,961
Inventories:
Finished goods and work-in-process 42,676 35,416
Raw materials and supplies 29,084 21,236
Prepaid expenses 5,070 6,499
Deferred income taxes 578 689
Total current assets 212,201 235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 21,939 21,696
Buildings 107,567 102,934
Machinery and equipment 322,993 307,178
Construction in progress 2,598 9,243
455,097 440,974
Less—Accumulated depreciation 242,935 225,482
Net property, plant and equipment 212,162 215,492
OTHER ASSETS:
Goodwill 73,237 73,237
Trademarks 175,024 175,024
Investments 96,161 64,461
Split dollar officer life insurance 74,209 74,441
Prepaid expenses 3,212 6,680
Equity method investment 3,935 4,254
Deferred income taxes 7,715 9,203
Total other assets 433,493 407,300
Total assets $857,856 $857,959
Liabilities and Shareholders’ Equity December 31,
2011 2010
CURRENT LIABILITIES:
Accounts payable $10,683 $9,791
Dividends payable 4,603 4,529
Accrued liabilities 43,069 44,185
Total current liabilities 58,355 58,505
NONCURRENT LIABILITES:
Deferred income taxes 43,521 47,865
Postretirement health care and life insurance benefits 26,108 20,689
Industrial development bonds 7,500 7,500
Liability for uncertain tax positions 8,345 9,835
Deferred compensation and other liabilities 48,092 46,157
Total noncurrent liabilities 133,566 132,046
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares authorized—36,479 and 36,057 respectively, issued 25,333 25,040
Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 and 20,466 respectively, issued 14,601 14,212
Capital in excess of par value 533,677 505,495
Retained earnings, per accompanying statement 114,269 135,866
Accumulated other comprehensive loss (19,953 ) (11,213 )
Treasury stock (at cost)—71 shares and 69 shares, respectively (1,992 ) (1,992 )
Total shareholders’ equity 665,935 667,408
Total liabilities and shareholders’ equity $857,856 $857,959
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)
For the year ended December 31,
2011 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $43,938 $53,063 $53,157
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation 19,229 18,279 17,862
Impairment charges — — 14,000
Impairment of equity method investment — — 4,400
Loss from equity method investment 194 342 233
Amortization of marketable security premiums 1,267 522 320
Changes in operating assets and liabilities:
Accounts receivable (5,448 ) 717 (5,899 )
Other receivables 3,963 (2,373 ) (2,088 )
Inventories (15,631 ) (1,447 ) 455
Prepaid expenses and other assets 5,106 4,936 5,203
Accounts payable and accrued liabilities 84 2,180 (2,755 )
Income taxes payable and deferred (5,772 ) 2,322 (12,543 )
Postretirement health care and life insurance benefits 2,022 1,429 1,384
Deferred compensation and other liabilities 2,146 2,525 2,960
Others (708 ) 310 305
Net cash provided by operating activities 50,390 82,805 76,994
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (16,351 ) (12,813 ) (20,831 )
Net purchase of trading securities (3,234 ) (2,902 ) (1,713 )
Purchase of available for sale securities (39,252 ) (9,301 ) (11,331 )
Sale and maturity of available for sale securities 7,680 8,208 17,511
Net cash used in investing activities (51,157 ) (16,808 ) (16,364 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares repurchased and retired (18,190 ) (22,881 ) (20,723 )
Dividends paid in cash (18,407 ) (18,130 ) (17,825 )
Net cash used in financing activities (36,597 ) (41,011 ) (38,548 )
Increase (decrease) in cash and cash equivalents (37,364 ) 24,986 22,082
Cash and cash equivalents at beginning of year 115,976 90,990 68,908
Cash and cash equivalents at end of year $78,612 $115,976 $90,990
Supplemental cash flow information
Income taxes paid $16,906 $20,586 $22,364
Interest paid $38 $49 $182
Stock dividend issued $47,053 $46,683 $32,538
(The accompanying notes are an integral part of these statements.)
Based on the information in these financial statements and the accompanying notes and schedules, compute the following values for each company in 2011. (Round all percentages to 1 decimal places, e.g. 15.1% and asset turnover ratio to 2 decimal places, e.g. 15.21.)
(1) Return on assets.
Return on assets
Tootsie Roll
%
Hershey Company
%
(2) Profit margin (use “Total Revenue”).
Profit margin
Tootsie Roll
%
Hershey Company
%
(3) Asset turnover.
Asset turnover
Tootsie Roll
times
Hershey Company
times
Problem 9-2A
At December 31, 2014, Navaro Corporation reported the following plant assets.
Land $ 3,036,000
Buildings $35,400,000
Less: Accumulated depreciation—buildings 12,068,100 23,331,900
Equipment 40,480,000
Less: Accumulated depreciation—equipment 5,060,000 35,420,000
Total plant assets $61,787,900
During 2015, the following selected cash transactions occurred.
Apr. 1 Purchased land for $2,226,400.
May 1 Sold equipment that cost $607,200 when purchased on January 1, 2008. The equipment was sold for $172,040.
June 1 Sold land for $1,619,200. The land cost $1,012,000.
July 1 Purchased equipment for $1,113,200.
Dec. 31 Retired equipment that cost $708,400 when purchased on December 31, 2005. No salvage value was received.
Your answer is correct.
Journalize the transactions. Navaro uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Solution
Problem 9-2A
May 1:
Accumulated Depreciation—Equipment = ($607,200 x 1/10 x 4/12) = $20,240
Cost $607,200
Accum. depr.—Equipment [($607,200 x 1/10) x 7 + $20,240)] (445,280 )
Book value 161,920
Cash proceeds 172,040
Gain on disposal $ 10,120
Dec. 31
Accumulated Depreciation—Equipment = ($708,400 x 1/10) = $70,840
Cost $708,400
Accum. depr.—Equipment ($708,400 x 1/10 x 10) (708,400 )
Book value $ 0
Record adjusting entries for depreciation for 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Problem 8-3A
Presented below is an aging schedule for Bosworth Company.
Customer Total Not Yet Due Number of Days Past Due
1–30 31–60 61–90 Over 90
Aneesh $ 24,100 $ 9,100 $15,000
Bird 45,700 $ 45,700
Cope 59,600 8,500 8,900 $42,200
DeSpears 48,600 $48,600
Others 156,700 88,600 43,000 25,100
$334,700 $142,800 $61,000 $40,100 $42,200 $48,600
Estimated percentage uncollectible 5% 7% 14% 24% 59%
Total estimated bad debts $ 55,826 $ 7,140 $4,270 $5,614 $ 10,128 $28,674
At December 31, 2013, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $6,200.
Journalize the adjusting entry for bad debts at December 31, 2013. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Problem 8-3A
Post the adjusting entry for bad debts at December 31, 2013.
Bad Debts Expense
Allowance for Doubtful Accounts
Journalize the 2014 transactions: (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
1. March 1, a $810 customer balance originating in 2013 is judged uncollectible.
2. May 1, a check for $810 is received from the customer whose account was written off as uncollectible on March 1.
Post to the allowance account these 2014 events. (Post entries in the order of journal entries posted in the previous part.)
Journalize the adjusting entry for bad debts at December 31, 2014, assuming that the unadjusted balance in Allowance for Doubtful Accounts is a debit of $1,400 and the aging schedule indicates that total estimated bad debts will be $36,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)