Required information Comprehensive Problem 02-76 (LO 02-1, LO 02-2, LO 02-3, LO 02-4, LO 02-5) (Algo) [The following information applies to the questions displayed below.] Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2020. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2020: Date Placed in Asset Cost Service S 180, 000 Office furniture Machinery Used delivery truck* *Not considered a luxury automobile. 02/03/2020 1, 566, 000 07/22/2020 46, 000 08/17/2020 During 2020, Karane was very successful (and had no §179 limitations) and decided to acquire more assets in 2021 to increase its production capacity. These are the assets acquired during 2021: Date Placed in Service Asset Cost $ 406, 000 Computers and information system Luxury autof Assembly equipment Storage building 03/31/2021 05/26/2021 08/15/2021 81, 500 1, 230. 000 700, 000 11/13/2021 tUsed 100% for business purposes. Karane generated taxable income in 2021 of $1,740,000 for purposes of computing the $179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) (Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers.) Comprehensive Problem 02-76 Part b (Algo) Required: b. Compute the maximum 2021 depreciation deductions, including $179 expense (ignoring bonus depreciation). Answer is complete but not entirely correct. Section 179 Current MACRS Depreciation Total Cost MACRS Basis Description Cost Recovery Deduction Expense 2020 Assets Office furniture s 180,000 1,566,000 180,000 44,082 128,817 44,082 Machinery 526,000 128,817 Used delivery truck 46,000 46,000 14,720 14,720 2021 Assets Computers and Information System Luxury Auto 406,000 406,000 81,200 81,200 81,500 227,000 X 700,000 S 2,166,500 10,188 8 32,867 8 81,500 10,188 Assembly Equipment 1,230,000 1,003,000 X 1,035,867 Storage Building 700,000 2,247 2,247 Total S 4,209,500 $ 1,003,000 314,121 S 1,317,121
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
![Required information
Comprehensive Problem 02-76 (LO 02-1, LO 02-2, LO 02-3, LO 02-4, LO 02-5) (Algo)
[The following information applies to the questions displayed below.]
Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2020. In the process
of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2020:
Date Placed in
Service
02/03/2020
07/22/2020
Asset
Сost
$ 180, 000
Office furniture
Machinery
Used delivery truck*
*Not considered a luxury automobile.
1, 566, 000
46, 000
08/17/2020
During 2020, Karane was very successful (and had no $179 limitations) and decided to acquire more assets in 2021 to
increase its production capacity. These are the assets acquired during 2021:
Date Placed in
Service
Cost
$ 406, 000
Asset
Computers and information system
Luxury autot
Assembly equipment
Storage building
03/31/2021
05/26/2021
08/15/2021
81, 500
1, 230, 000
700, 000
11/13/2021
tUsed 100% for business purposes.
Karane generated taxable income in 2021 of $1,740,000 for purposes of computing the $179 expense
(Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) (Leave no answer blank. Enter zero if
applicable. Input all the values as positive numbers.)
ation.
Comprehensive Problem 02-76 Part b (Algo)
Required:
b. Compute the maximum 2021 depreciation deductions, including $179 expense (ignoring bonus depreciation).
Answer is complete but not entirely correct.
Section
179
Current
МАCRS
Depreciation
Total Cost
MACRS
Basis
Description
Cost
Recovery
Deduction
Expense
2020 Assets
180,000 Os
1,566.000O
46,000
180,000
526,000
46,000
Office furniture
s
44,082
44,082
128,817
14,720
Machinery
128,817
Used delivery truck
14.720
2021 Assets
Computers and Information
System
Luxury Auto
406.000
406,000
81,200
81,200
81,500
1,230,000
O
1,003,000 X
81,500
227,000 X
700,000
$ 2,166,500
10,188 X
32,867 X
10,188
Assembly Equipment
1,035,867
Storage Building
700,000 O
2,247
2,247
$ 4,209,500 s 1,003,000
$ 1,317,121
Total
314,121](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F73907ca2-1228-44b0-96a3-eb2affd82e48%2Fe55b399a-2e86-4f76-9b77-f1c23e279e8f%2Fc9py90q_processed.png&w=3840&q=75)
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