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Madrasa Inc

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On December 31, 2012, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets.;1. Depreciable asset A was purchased January 2, 2009. It originally cost $500,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2012, the decision was made to change the depreciation method from straight-line to sum-of-the-years? digits, and the estimates relating to useful life and salvage value remained unchanged.;2. Depreciable asset B was purchased January 3, 2008. It originally cost $243,000 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero salvage value. In 2012, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $3,200.;3. Depreciable asset C was purchased January 5, 2008. The asset?s original cost was $154,900, and this amount was entirely expensed in 2008. This particular asset has a 10-year useful life and no salvage value. The straight-line method was chosen for depreciation purposes.;Additional data;1. Income in 2012 before depreciation expense amounted to $405,000.;2. Depreciation expense on assets other than A, B, and C totaled $50,100 in 2012.;3. Income in 2011 was reported at $349,000.;4. Ignore all income tax effects.;5. 129,200 shares of common stock were outstanding in 2011 and 2012.;(a);Prepare all necessary entries in 2012 to record these determinations. (Credit account titles are automatically indented when amount is entered. Do not indent manually.);No. Account Titles and Explanation Debit Credit;1.;2.;3.;(To correct equipment expensed.);(To record depreciation.);Question 4;Accounts Receivable;Accumulated Depreciation - Buildings;Accumulated Depreciation - Equipment;Accumulated Depreciation - Machinery;Allowance for Doubtful Accounts;Amortization Expense;Bad Debt Expense;Buildings;Cash;Commission Expense;Commission Payable;Construction in Process;Copyrights;Cost of Goods Sold;Dealer's Fund Reserve;Debt Investments;Deferred Tax Liability;Depreciation Expense;Dividend Revenue;Due to Customer;Equipment;Equity Investments;Equity Investments (Available-for-sale);Equity Investments (Equity Method);Fair Value Adjustment;Fair Value Adjustment (Available-for-Sale);Finance Expense;Gain on Disposal of Plant Assets;Gain on Sale of Plant Assets;Income Summary;Insurance Expense;Interest Receivable;Interest Revenue;Inventory;Inventory on Consignment;Inventory Over and Short;Lawsuit Liability;Lawsuit Loss;Loss Due to Market Decline of Inventory;Machinery;Maintenance and Repairs Expense;No Entry;Prepaid Insurance;Rent Receivable;Rent Revenue;Retained Earnings;Revenue from Investment;Salaries and Wages Expense;Salaries and Wages Payable;Sales Commission Expense;Sales Commission Expense Payable;Sales Commissions Payable;Sales Revenue;Sales Tax Expense;Sales Taxes Payable;Supplies;Supplies Expense;Trademarks;Trucks;Unearned Rent Revenue;Unrealized Holding Gain or Loss - Equity;Unrealized Holding Gain or Loss - Income;Warranty Expense;Warranty Liability

 

Paper#35229 | Written in 18-Jul-2015

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