The Laura Company Has the Following Errors on Its Books

question 33

Essay

The Laura Company has the following errors on its books as of December 31, 2015. The books for 2015 have not yet been closed.
a.In 2015, fully depreciated equipment (with no residual value) that originally cost $8,000 was sold for $700 as scrap. The company credited the $700 proceeds to Equipment.
b.On January 1, 2014, the company recorded the purchase of equipment in exchange for a three-year, noninterest-bearing note payable in the amount of $10,000. Interest rates were then 8%, but no recognition was made of this fact. The present value of $1 at 8% for three periods is 0.7938. (Ignore depreciation.)
Required:
Prepare journal entries to correct these errors at December 31, 2015. Ignore income taxes.

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Definitions:

Total Utility

The total satisfaction received from consuming a particular quantity of goods or services.

Star Wars

A popular science fiction franchise created by George Lucas, comprised of movies, books, comics, and more.

Consumer Surplus

The variance between what consumers are prepared and capable of spending for a product or service compared to the actual amount they end up paying.

Marginal Utility

The additional satisfaction or utility gained by consuming one more unit of a good or service.