Machinery, Maintenance and Repairs Expense

On December 31, 2014, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three pieces of equipment.
1.
Equipment A was purchased January 2, 2011. It originally cost $520,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2014, the decision was made to change the depreciation method from straight-line to sum-of-the-years digits, and the estimates relating to useful life and salvage value remained unchanged.
2.
Equipment B was purchased January 3, 2010. It originally cost $249,000 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero salvage value. In 2014, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $3,200.
3.
Equipment C was purchased January 5, 2010. The assets original cost was $181,300, and this amount was entirely expensed in 2010. 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 2014 before depreciation expense amounted to $391,000.
2.
Depreciation expense on assets other than A, B, and C totaled $55,100 in 2014.
3.
Income in 2013 was reported at $410,000.
4.
Ignore all income tax effects.
5.
126,900 shares of common stock were outstanding in 2013 and 2014.
Prepare all necessary entries in 2014 to record these determinations.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)
 
Account Titles
Debit
Credit
1.
2.
3. (To correct Equipment Expensed)
4. (To record depreciation)
Prepare comparative retained earnings statements for Madrasa Inc. for 2013 and 2014. The company had retained earnings of $200,000 at December 31, 2012.
MADRASA INC.
Comparative Retained Earnings Statements
For the Years Ended
2014
2013
Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported
$
$
AddLess: Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported
Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported
AddLess: Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported
Error in Recording EquipmentNet Income/(Loss)Retained Earnings, December 31Retained Earnings, January 1, as adjustedRetained Earnings, January 1, as reported
$
$
Accounts:
 
Accounts Payable
Accounts Receivable
Accumulated Depreciation-Building
Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Advertising Expense
Amortization Expense
Allowance for Doubtful Accounts
Bad Debt Expense
Cash
Compensation Expense
Consignment Out
Construction in Process
Copyrights
Cost of Goods Sold
Deferred Gross Profit
Deferred Tax Liability
Depreciation Expense
Dividend Revenue
Due to Customer
Discount on Bonds Payable
Equipment
Equity Investments (Available-for-Sale)
Equity Investments (Equity Method)
Fair Value Adjustment
Finance Expense
Gain on Disposal of Plant Assets
Income Tax Receivable
Insurance Expense
Interest Expense
Interest Payable
Interest Receivable
Interest Revenue
Inventory
Inventory on Consignment
Investment Revenue
Lawsuit Liability
Lawsuit Loss
Loss Due to Market Decline of Inventory
Machinery
Maintenance and Repairs Expense
No Entry
Prepaid Insurance
Property, Plant, and Equipment
Purchases
Rent Revenue
Retained Earnings
Revenue from Investment
Salaries and Wages Expense
Salaries and Wages Payable
Sales
Sales Commission Expense
Sales Commission Payable
Sales Revenue
Sales Tax Expense
Sales Tax Payable
Share Capital
Supplies
Supplies Expenses
Trademarks
Unearned Rent Revenue
Unrealized Holding Gain or Loss – Equity
Unrealized Holding Gain or Loss – Income
Warranty Expense
Warranty Liabilit