70.2K

Verified Solution

Link Copied!

McClain Company incurred the following expenditures during 2019:

Apr.	9	The air conditioning system in the old manufacturing facility was replaced for $87,500. The old air conditioning system had a cost of $70,500 and a book value of $2,700. The old air conditioning system had no scrap value.
June	29	Annual maintenance of $37,750 was performed.
Sept.	12	The roof of the old manufacturing facility is replaced at a cost of $64,500. This expenditure substantially extended the life of the facility.
Dec.	28	A new wing was added to the manufacturing facility at a cost of $272,000. This expenditure substantially increased the productive capacity of the plant.

Required:

1.

Prepare journal entries to record McClains expenditures for 2019.

2.

Next Level What is the effect on the financial statements if management had improperly accounted for the: a. addition of the new wing to the manufacturing facility b. annual maintenance expenditures CHART OF ACCOUNTS McClain Company General Ledger ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Building 185 Equipment 188 Air Conditioning System (New) 189 Air Conditioning System (Old) 198 Accumulated Depreciation: Air Conditioning System (Old) 199 Accumulated Depreciation: Building LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue 881 Gain on Disposal of Property, Plant, and Equipment EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 514 Repair and Maintenance Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 893 Loss on Disposal of Property, Plant, and Equipment 910 Income Tax Expense

Answer & Explanation Solved by verified expert

See Answer