Question

Wiater Company operates a small manufacturing facility. On January 1, 2018, an asset account for the company showed the following balances Equipment Accumulated Depreciation (beginning of the year) $305,000 192,000 During the first week of January 2018, the following expenditures were incurred for repairs and maintenance: Routine maintenance and repairs on the equipment Major overhaul of the equipment that improved efficiency 2,950 35,000 The equipment is being depreciated on a straight-line basis over an estimated life of 15 years with a $17,000 estimated residual value. The annual accounting period ends on December 31 Required: Indicate the effects (accounts, amounts, and for increase and for decrease) of the following two items on the accounting equation, using the headings shown below. (Enter any decreases to Assets, Liabilities or Stockholder's Equity with a minus sign.) 1. The adjustment for depreciation made last year at the end of 2017 2. The two expenditures for repairs and maintenance during January 2018. (Record each entry separately)

Answer 1

Page ① Date:_ Page No. Note: Depreclation Calculation of Annual straight line Method: till 2017 | As per Annual Depreciation = - Cost - Salvage value useful like Annual Depreciation = $305000 - $17000 15 $ 19200 - Annual Deprivation = * Effects on acounting for deprecation made equation last year of at the adjustment the end Assets Liabilities & Stockholder's equity - 19200 + Net - 19200 - Acumulated - Deprecation Income

I Page ③ Date: IL Page No.: Note: As per the auounting standards all routine maintenance and repairs on an attet which donut don't improve the efficiency of the asset but only maintain the same are not capitalized in the amount of asset but are expensed as they occur. - On the other hand, the major expenses on an asset which increase the efficiency of an asset are capitalized in the amount of asset and deprecated over a period of time. Applying provisions considered as OH and $ 35000 amount of asset. stated above $2950 to expense and to be written. to be capitalized in the Asset = Liabilities t stockholder's Equity a) Cash - 2950 = t Net Income - 2950 6 cash - 35000 +35000 = ont