Question 1 - On September 30, 2011, Sternberg Company sold office equipment for $12,000. The equipment was purchased on March 31, 2008, for $24,000. The asset was being depreciated over a five-year life using the straight-line method, with depreciation based on months in service. No residual value was anticipated. Sternberg's fiscal period is the calendar year.
Required: Prepare all journal entries required to record the acquisition, cost allocation, and disposal of the equipment in proper format (show all calculations for partial credit review).
Question 2 - In December of 2011, XL Computer's internal auditors discovered that office equipment costing $800,000 was charged to expense in 2009. The asset had an expected life of 10 years with no residual value. XL would have recorded a half year of depreciation in 2009. XL's fiscal period is the calendar year.
Required:
a. Prepare the journal entry to record depreciation for 2011.
b. Prepare the correcting entry required in 2011; ignore income taxes (show all calculations for partial credit review).
Question 3 - On January 1, 2010, Sparks Company purchased for $2,160,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $90,000.
Required:
a. Prepare a depreciation schedule for the equipment using the double declining method; assume that Spark elects to switch to the straight line method in year three.
b. Indicate any related reporting required in order for Spark's financial statements to be in accordance with GAAP.