Reference no: EM131134364
Problem 1 - Depreciation
Ace Specialties bought a delivery truck for $40,000 cash. The expected useful life is 5 years and the salvage value is $5,000.
Ace uses a calendar year and the truck was purchased on July 1, 2015.
Calculate the depreciation for each year using the straight line method and the double declining balance method.
Show the journal entry for year one for the double declining balance method.
Straight line method
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year
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depreciation
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remaining book value
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2015
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2016
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2017
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2018
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2019
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2020
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2021
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Double declining balance method
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year
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depreciation
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remaining book value
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2015
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2016
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2017
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2018
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2019
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2020
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2021
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Journal Entry
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Journal Entry
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date
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account
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debit
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credit
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12/31/2015
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Problem 2 - Below you will see three scenarios for disposal of assets. Prepare the journal entry for each.
On June 1, 2016 Axle Corporation sold a truck for $10,000 cash. The truck originally cost $45,000 and the accumulated depreciation as of May 31, 2016 was 37,600.
On September 1, 2016 Smith Conveyor Corp sold a piece of factory machinery for $12,000. The machine originally cost $52,000 and had accumulated depreciation of $36,500 as of August 31, 2016.
On October 1, 2016 Axle Corporation scraped of a piece of machinery for no proceeds. The machine originally cost $20,000 and had accumulated depreciation of $18,000 as of September 30, 2016.
On November 1, 2016 Smith Conveyor Corp scrapped a piece of machinery for no proceeds. The machine originally cost $22,000 and was fully depreciated.
Problem - Listed below are nine fixed asset transactions. Record the journal entries. Dates and descriptions are not required. The only account titles you will need are listed:
Account titles:
Cash
Land
Land Improvements
Building
Furniture
Expense (determine expense account title)
Prepaid account (determine full account title)
Item 1- Paid $2,500 for one year insurance coverage on equipment
Item 2- Paid $7,500 for trees and shrubs
Item 3- Paid $500 attorney's fees for document preparation related to land purchase
Item 4- Paid $150,000 for land and building. The land was separately valued at $40,000, and the building at $120,000. Hint - the cash is only $150,000 and the entry must balance.
Item 5- Paid $1,000 freight costs on purchase of new furniture
Item 6- Paid $300 for staplers, trash cans, and desktop mats
Item 7- Ordered new $50,000 truck, to be delivered and paid for in the future
Item 8- Paid $10,000 of interest costs on loan on active building construction project
Item 9- Paid $25,000 to expand parking lot paving.