Question

ACCT:2100 Introduction to Financial Accounting Spring 2018 Chapter 8 Take-Home Quiz Truffle Bakery incurred each of the following transactions during 2017. Truffle uses the Units of-Production Method on all machinery, and the 175% declining balance method on buildings. Round all unit-of-production computations to the nearest $.01 A. On March 1, 2017 Truffle purchased a new oven. The cost of the oven was $375,000 and has a residual value of $85,000. The estimated total production of the oven is 150,000 machine hours. In 2017, the oven was used 3,750 machine hours during 2017. The machine was purchased with cash B. Truffle reported the following information about its icing machine as of December 31 2017 Cost Accumulated Depreciation Estimated future cash flows Fair value $750,000 250,000 450,000 425,000 C. Purchased a patent on July 1, 2015 for $15,000. The company intends to use the patent for ten years D. On January 1, 2017, Truffle spent $20,000 to extend the useful life of a dishwasher. The dishwasher was purchased on January 1, 2015. The estimated useful life at the time of purchase was 100,000 machine hours. It was purchased for $175,000 and had a residual value of $25,000. The dishwasher was used 4,500 and 3,250 hours in 2015 and 2016 respectively. The improvements extend estimated useful life by 30,000 machine hours Truffle used 4,250 machine hours during 2017 E. Purchased land on October 1, 2017 to build new bakery. The parcel of land cost $435,000. In addition, Truffle paid $15,000 in realtor fees, and $35,000 to clear the land in preparation for construction. Truffle used a 5% note payable to complete the entire purchase. Principal and interest are due on 10/1/2019 F. Truffle sold an old bakery on July 1, 2017 for $1,100,000. The building was originally purchased on January 1, 2014 for $1,500,000 and has a residual value of $180,000. The bakery has a useful life of 20 years Required: I. Prepare the original journal entries to record the occurrence of each transaction in 2017 repare all adjusting journal entries Truffle Bakery must prepare at December 31, 2017 Prepare a partial balance sheet and partial income statement for 2017. Show what Truffle would report based on the information provided 3.

175% declining balance method is (Cost - Accumulated depreciation) x 1.75/useful life. Similar to the double declining balance method (Cost - Accumulated depreciation) x 2/useful life.

Answer 1

Truffle Bakery 1/Mar/2017 Machinery A/c Dr 3,75,000 To cash A/c(Being over purchased) 3,75, 000 Machinery A/c 20,000 To cash A/c 20,000(Being amount spent for extension of useful life of dishwasher) 1/10/17 Land A/c Dr 4,85,000 Refer Note(e) to 5% Note payable A/c 485000(Being cost incurred for purchase of land) 1/17/17 cash A/c Dr Loss on sale of Build up A/c To Building A/c 11,00,000 1,69,000 12, 69, 000 Adjusting entries: - 31/12/17 Depreciation A/c Dr 7250 * Refer Note(a) To Machinery A/c 7250s(Depression on over accounted) Depreciation A/c Dr 50,000* To Machinery A/c (Being Depreciation for icip Machine accounted) 50,000 Refer Note(6) Amortisation on patents the Dr 1500* To patents A/c(Being amortization of patents for the year accounted Depreciation A/c Dr To Machinery A/c (Beip depreciation on dishwasher) 5910 31/12/17 Interest expense A/c Dr 6062 To Interest accrued A/c 6062 [Being Interest on Note payable for the year accounted) Depreciation A/c Dr 33000