Reference no: EM132911485

Read the following case and dailyize the transactions and the corresponding adjustment entries:

At Caribe Music, a company dedicated to the sale of stereos, there were the following transactions and adjustments in the past two years. Transactions are related to the use of shipping equipment. The depreciation method was double declining balance.

February 6

A used delivery truck was purchased in cash for $35,000.

July 7

$700 was paid for truck repairs.

December 31

Records the depreciation of the truck for the calendar year. The truck had a lifespan of 3 years. The truck had a residual of $4,500.

Second year

January 8

A new truck was purchased in cash for $52,000.

June 10

Maintenance and repairs were made to the truck for $625.

July 9

$300 was paid for repairs to the used truck that was purchased the first year.

September 19

The truck that was purchased in the first year was sold for $20,000. Posts depreciation at the date of the sale of the truck.

December 31

Posts the depreciation of the truck purchased in the second year. The truck has a lifespan of 5 years. The truck has a residual of $7,200.

Problem 1: Compute the turnover ratio of fixed assets.

Problem 2: Explain how the result of the turnover ratio of both companies is interpreted.