ACC – P22-6, Madrasa Inc

$13.00

Description

“On December 31, 2010, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets.

1. Depreciable asset A was purchased January 2, 2007. It originally cost _____________
and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally
expected to be useful for _________ years and have a zero salvage value. In 2010, the
decision was made to change the depreciation method from straight-line to sum-of-years’-digits, and
the estimates relating to useful life and salvage value remained unchanged.
2. Depreciable asset B was purchased January 3, 2006. It originally cost
and, for depreciation purposes, the straight-line method was chosen. The asset was originally
expected to be useful for ______ years and have a zero salvage value. In 2010, the
decision was made to shorten the total life of this asset to ____ years and to
estimate the salvage value at ____________
3. Depreciable asset C was purchased January 5, 2006. The asset’s original cost was ____________
and this amount was entirely expensed in 2006. This particular asset has a 10-year useful life and no salvage value. The straight-line method was chosen for depreciation purposes.

Additional data:
1. Income in 2010 before depreciation expense amount to ____________
2. Depreciation expense on assets other than A, B, and C totaled _________ in 2010.
3. Income in 2009 was reported at ___________
4. Ignore all income tax effects.
5. ____________ shares of common stock were outstanding in 2009 and 2010.

Instructions:
(a) Prepare all necessary entries in 2010 to record these determinations.
(b) Prepare comparative retained earnings statements for Madrasa Inc. for 2009 and 2010. The company had retained earnings of_________at December 31, 2008.

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