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Ichiro Manufacturing Company-depreciation schedule for semi-trucks of Ichiro Manufacturing Company was requested by yo

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Question;depreciation schedule for semi-trucks of Ichiro Manufacturing Company was requested by your auditor soon after December 31, 2013, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2010 to 2013, inclusive. The following data were ascertained.Balance of Trucks account, Jan. 1, 2010 Truck No. 1 purchased Jan. 1, 2007, cost $37,260Truck No. 2 purchased July 1, 2007, cost 45,540Truck No. 3 purchased Jan. 1, 2009, cost 62,100Truck No. 4 purchased July 1, 2009, cost 49,680Balance, Jan. 1, 2010 $194,580The Accumulated Depreciation?Trucks account previously adjusted to January 1, 2010, and entered in the ledger, had a balance on that date of $62,514 (depreciation on the four trucks from the respective dates of purchase, based on a 5-year life, no salvage value). No charges had been made against the account before January 1, 2010.Transactions between January 1, 2010, and December 31, 2013, which were recorded in the ledger, are as follows.July 1, 2010 Truck No. 3 was traded for a larger one (No. 5), the agreed purchase price of which was $82,800. Ichiro Mfg. Co. paid the automobile dealer $45,540 cash on the transaction. The entry was a debit to Trucks and a credit to Cash, $45,540. The transaction has commercial substance.Jan. 1, 2011 Truck No. 1 was sold for $7,245 cash, entry debited Cash and credited Trucks, $7,245.July 1, 2012 A new truck (No. 6) was acquired for $86,940 cash and was charged at that amount to the Trucks account. (Assume truck No. 2 was not retired.)July 1, 2012 Truck No. 4 was damaged in a wreck to such an extent that it was sold as junk for $1,449 cash. Ichiro Mfg. Co. received $5,175 from the insurance company. The entry made by the bookkeeper was a debit to Cash, $6,624, and credits to Miscellaneous Income, $1,449, and Trucks, $5,175.Entries for depreciation had been made at the close of each year as follows: 2010, $43,470, 2011, $46,575, 2012, $51,854, 2013, $62,928.(a) For each of the 4 years, compute separately the increase or decrease in net income arising from the company?s errors in determining or entering depreciation or in recording transactions affecting trucks, ignoring income tax considerations. (Enter Credit amounts and Understated Income amounts with a negative sign preceding the number, e.g. -2,520 or in parenthesis, e.g. (2,520).)Per Company BooksAs AdjustedNetTrucks dr. (cr.)Acc. Dep. Trucks dr. (cr.)Retained Earnings dr. (cr.)Trucks dr. (cr.)Acc. Dep., Trucks dr, (cr.)Retained Earnings dr, (cr.)Income Overstated (Understated)1/1/10 Balance $$$$$$$7/1/10 Purchase Truck #5 Trade Truck #3 12/31/10 Depreciation 12/31/10 Balances 1/1/11 Sale of Truck #1 12/31/11 Depreciation 12/31/11 Balances 7/1/12 Purchase of Truck #6 7/1/12 Disposal of Truck #4 12/31/12 Depreciation 12/31/12 Balances 12/31/13 Depreciation 12/31/13 Balance $$$$$$$(b) Prepare one compound journal entry as of December 31, 2013, for adjustment of the Trucks account to reflect the correct balances as revealed by your schedule, assuming that the books have not been closed for 2013. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)Account Titles and ExplanationDebitCredit

 

Paper#43366 | Written in 18-Jul-2015

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