Wilson Owned Equipment with an Estimated Life of 10 Years

question 49

Multiple Choice

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2010. On January 1, 2010, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2010 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: Compute the amortization of gain through a depreciation adjustment for 2010 for consolidation purposes.

• A) $1,950.
• B) $1,825.
• C) $1,500.
• D) $2,000.
• E) $5,250.

Discern the effects of errors in closing entries on financial statements.

Assess the financial outcome (net income or net loss) through closing entries.

Recognize the role of the Income Summary account in the closing process.

Understand the implications of not closing accounts properly.

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Definitions:

Environmental Changes

pertain to alterations in the external surroundings that can impact an organization, including economic, social, technological, and ecological factors.

Knowledge Development

The process of acquiring, creating, sharing, and utilizing information and expertise to achieve organizational or personal objectives.

Moral Principles

Fundamental beliefs about what is right, wrong, or ethical that guide individuals' behavior.

Ethics

A set of moral principles or values that govern individuals' behaviors or the conducting of an activity.