CA5-1 (Reporting
the Financial Effects of Varied Transactions)
In an
examination of Arenes Corporation as of December 31, 2014, you have learned
that the following situations exist. No entries have been made in the
accounting records for these items
1. The
corporation erected its present factory building in 1999. Depreciation was
calculated by the straight-line method, using an estimated life of 35 years.
Early in 2014, the board of directors conducted a careful survey and estimated
that the factory building had a remaining useful life of 25 years as of January
1, 2014.
2. An
additional assessment of 2013 income taxes was levied and paid in 2014.
3. When
calculating the accrual for officers' salaries at December 31, 2014, it was
discovered that the accrual for officers' salaries for December 31, 2013, had
been overstated.
4. On
December 15, 2014, Arenes Corporation declared a cash dividend on its common
stock outstanding, payable February 1, 2015, to the common stockholders of
record December 31, 2014.
Instructions
Describe fully
how each of the items above should be reported in the financial statements of
Arenes Corporation for the year 2014.
1. The new estimate would be used in computing depreciation expense for 2007. No adjustment of the balance in accumulated depreciation
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