Zealand Company accountants

by | Oct 28, 2021 | Homework Help

The year 2020 was not a good one for Zealand Company accountants. The company made several financial accounting changes that year. Assume a 30% tax rate where appropriate.First, the company changed the total useful life from 20 years to 13 years on an asset purchased January 1, 2017, for $350,000. The asset was originally expected to be sold for $50,000 at the end of its useful life, but that amount also was changed in 2020 to $200,000. Zealand applies the straight-line method of depreciation to this asset.Second, the company changed from FIFO to LIFO but is unable to recreate LIFO inventory layers. The FIFO 2020 beginning and ending inventories are $30,000 and $45,000, respectively. The company expects LIFO to render income numbers more useful for prediction. Third, the company changed to the straight-line method from the sum-of-years’-digits method on equipment purchased for $650,000 on January 1, 2016. The equipment has a $100,000 residual value and 10-year useful life. These values were not changed. The change in depreciation method was made to provide a better measure of expired equipment cost because the annual benefits derived from the asset have been relatively constant. Fourth, an error in amortizing patents was discovered in 2020. Patents costing $510,000 on January 1, 2018, were amortized over their legal life (20 years). The accountant neglected to obtain an estimate of the patent’s economic life, which totals only 5 years. The entire cost of the patents was deducted for tax purposes when acquired.Required:Record the entries in 2020 necessary to make the accounting changes. Assume a tax rate of 30%.

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