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.

Question

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.

Quizplus · Accepted Answer

The Answer of 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.

The Laura Company Has the Following Errors on Its Books