Question

For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on assets, liabilities, and net income by entering for each account affected the account name and amount and indicating whether it is an addition (+) or a subtraction (–). Transaction a has been done as an illustration. Net income is not affected by every transaction. In some cases, only one column may be affected because all of the specific accounts affected by the transaction are included in that category.

Assests Liabilities Net Income

a. Recorded $200 of Decpriciaiton expense Accumulated Depriciation -200 Depriciation Expense -200


b. Sold land that had originally cost $39,000 for $34,200 in cash.
c. Recorded a $204,000 payment for the cost of developing and registering a patent.
d. Recognized periodic amortization for the patent (in part c ) using the maximum statutory useful life.
e. Capitalized 9,600 of cash expenditures made to extend the useful life of production equipment.
f. Expensed S5,400 of cash expenditures incurred for routine maintenance of production equipment.
g. Sold a used machine for S27,000 in cash. The machine originally cost $90,000 and had been depreciated for the first two years of its five-year useful life using the double-declining-balance method. (Hint: You must compute the balance of the accumulated depreciation account before you can record the sale.)
h. Purchased a business for $960,000 in cash. The fair values of the net assets acquired were as follows: Land, $120,000; Buildings, $600,000; Equipment, S300,OOO; and Long-Term Debt, $210,000.

Answer 1

Answer:

a. - Assets, no effect on liabilities, - net income (assuming the last depreciation with a minus sigh is a mistake)

no effect Assets or liability or net income (assuming the transaction is correct)

b. + and - Assets, no effect in liabilities, + or - net income ( depending if it is a loss or gain and if gains and losses are OCI or Profit and loss) if OCI no effect on net income

c. + Asset, no effect liability, + net income

d.  - Asset, - net income

e. + and - effect Asset, no effect liability and net income

f. - Asset, - net income

g. + and - Assets,  + net income ( depending on whether gains are OCI or P&L)

h. - and+ Assets, + liabilities

Explanation:

gains and losses on PPE are accounted for in OCI

if thats the case all gains on or losses on PPE do not affect net incom just OCI