Question

Hulme Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2020, an asset account for the company showed the following balances: $ Manufacturing equipment. Accumulated depreciation through 2019 120,000 57,600 During 2020, the following expenditures were incurred for the equipment: Major overhaul of the equipment on January 2, 2020, that improved efficiency Routine maintenance and repairs on the equipment $ 13,000 1,000 The equipment is being depreciated on a straight-line basis over an estimated life of 15 years with a $12,000 estimated residual value. The annual accounting period ends on December 31. Required: Indicate the effects of the following on the accounting equation. (Enter decreases to account categories as negative amounts and do not round your intermediate calculations.) 1. The adjustment for depreciation at the end of 2019. 2. The two expenditures during 2020 for (a) the major overhaul of the equipment and (b) repairs and maintenance. Assets Liabilities Stockholders' Equity Event/Date 1. 2019 2a. 2020 L 2b. 2020

Answer 1

Event/Date Assests |Liabilities Stockholders' Equity Remarks No adjustemnet will done for Year ending 2019 because expenditure has been 62400 incurred in Year 2020 (133000-66657) will be the shareholders 66343 equity 57600 1 2019 120000 2 (a) 133000 66657 + 2020 (120000+13000) Assuming Repair and maintenance is paid in cash. Rs 1000 is deducted from both 2020 66657+ 65343 Assest and Stockholders' equity 2 (b) 132000

Working Note 1 Estimated Life 15 Year Esrtimated residual value Machine Cost (A) 12000 120000 Accumulated depreciation (B) 57600 Written Down Valur of Machine as on 2019 (A-B) 62400 Depreciation per Year Machine utilised for how many year till date 7200 (120000-12000)/15 8 57600/7200 Remaining life of Machine 7 Working Note 2 As major overhaul of Equipment is done that will be added to written down value of machine as on 2019 i.e 62400 So New Machine Value as on january 2,2020 would be 75400 62400+13000 9,057 (75400-12000)/7 Deprecition for the year 2020 would be Accumulated depreciation as on 2020 66,657