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The Diamond Glitter Company is in the process of preparing its financial statements

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Question;Problems:The;Diamond Glitter Company is in the process of preparing its financial;statements for 2012. Assume that no entries for depreciation have been;recorded in 2012. The following information related to depreciation of;fixed assets is provided to you.1.;The company purchased equipment on January 2, 2009, for $165000. At;that time, the equipment had an estimated useful life of 7 years with a;$25000 salvage value. The equipment is depreciated on a straight-line;basis. On January 2, 2012, as a result of additional information, the;company determined that the equipment has a remaining useful life of 3;years with a $15000 salvage value.2.;During 2012, the company changed from the double-declining-balance;method for its building to the straight-line method. The building;originally cost $625000. It had a useful life of 10 years and a salvage;value of $50000. The following computations present depreciation on both;bases for 2010 and 2011.3.;The company purchased a machine on July 1, 2010, at a cost of $450000.;The machine has a salvage value of $25000 and a useful life of 10 years.;The company's bookkeeper recorded straight-line depreciation in 2010;and 2011 but failed to consider the salvage value. Ignore Tax effect.4. The company has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows.December 31, 2011$ 5,400December 31, 2012$ 4,6005.;In reviewing the December 31, 2011, inventory, the company discovered;errors in its inventory-taking procedures that have caused inventories;for the last 3 years to be incorrect, as follows. The company has;already made an entry that established the incorrect December 31, 2012;inventory amount.December 31, 2010Understated$ 32,000December 31, 2011Understated$ 51,000December 31, 2012Overstated$ 9,5006.;At December 31, 2012, the company decided to change to the straight;-line method depreciation method on its retail display equipment from;double-declining-balance. The equipment had an original cost of $250000;when purchased on January 1, 2011. It has a salvage value of 0 and a;8-year useful life. Depreciation expense recorded prior to 2012 under;the double-declining-balance method was $62500. The company has already;recorded 2012 depreciation expense of $46875 using the;double-declining-balance method.7.;Before the current year, the company accounted for its income from;long-term construction contracts on the completed-contract basis. Early;this year, the company changed to the percentage-of-completion basis for;accounting purposes but continues to use the completed-contract method;for tax purposes. Income for the current year has been recorded using;the new method. Prior year tax effects must be considered. The following;information is available.Pretax IncomePercentage-of-CompletionCompleted-ContractPrior to 2012$320,000$180,0002012$140,000$120,000Required:Prepare;the journal entries necessary at December 31, 2012, to record the;corrections and changes made to date related to the information;provided. The books are still open for 2012. The income tax rate is 35%.;The company has not yet recorded its 2012 income tax expense and;payable amounts so current-year tax effects may be ignored.

 

Paper#39144 | Written in 18-Jul-2015

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