Reference no: EM131629580

Ace Lawn Care Module - Mini Practice Problem

In June, Jim made several purchases to accommodate his growing business.

June 2 - Jim purchased a storage location for lawn care equipment, paid $45,000 for a building on 1 acre.  The land is appraised at $8,000.  The building has an estimated life of 10 years with a $5,000 salvage value. Jim paid $2,000 down and financed the remaining purchase price with a 5% 5 year note.

June 4 - Jim purchased a trailer to haul lawn care equipment for $2,300; estimated life is 5 years with no salvage value.  Jim paid for the purchase in cash.

June 5 - Jim purchased a gas powered trimmer for $1,200 and a commercial leaf-blower for $1,500.  Jim estimates they will each have a two year life and no salvage value.  Jim paid for both of these pieces of equipment on account.

These are in addition to the three assets Jim acquired in May:

Date	Item	Cost	Estimated Life	Salvage Value
May 2	Truck	$5,000	5 years	$500
5	Lawn Mower	$300	2 years	$0
5	Aerator	$500	2 years	$0

Depreciation was recorded in May for these assets using the straight-line method however Jim is considering other depreciation methods and has asked you to prepare a comparison of the straight-line method with the double declining balance (200% DDB) method before he decides.

Instructions:

1. Using the chart of accounts provided below and the Excel template provided with this assignment, record the transactions for the new assets purchased in June, 2014. Start with Page 7 for the journal entries.  Explanations are optional.

2. Prepare a monthly schedule of depreciation for each of the seven assets for 2014 using 1) straight-line and 2) 200% DDB.  (Assume assets purchased before the 15th of the month will be depreciated as if owned for the entire month).  Remember that you are calculating monthly depreciation, not annual and adjust your depreciation rate.  Carry your depreciation rate to four decimals and round the depreciation expense to two decimals. 

3. Jim has decided that equipment will be depreciated using straight-line and the building using 200% DDB.  Prepare the adjusting journal entries for depreciation for the month of June, 2014. Start with Page 8 for the adjusting journal entries.  Explanations are optional.

Bill's Lawn Care Chart of Accounts

Classification	Account Number	Account Name
ASSETS	101	Cash
	110	Accounts Receivable
	112	Allowance for Doubtful Accounts
	115	Notes Receivable
	116	Interest Receivable
	120	Supplies
	130	Prepaid Insurance
	140	Inventory
	150	Equipment
	152	Land
	153	Building
	155	Accumulated Depreciation - Equipment
	156	Accumulated Depreciation - Building
LIABILITIES	201	Accounts Payable
	220	Notes Payable
	225	Interest Payable
OWNER'S EQUITY	301	Owner's Capital
	305	Owner's Drawings
	310	Income Summary
REVENUES	401	Lawn Service Revenue
	410	Sales Revenue
	415	Sales Returns and Allowances
	420	Interest Income
COST OF GOODS SOLD	501	Purchases
	505	Purchase Returns and Allowances
EXPENSES	620	Supplies Expense
	630	Fuel Expense
	640	Repair and Maintenance Expense
	650	Advertising Expense
	660	Insurance Expense
	670	Depreciation Expense
	680	Interest Expense
	690	Bad Debt Expense
	695	Miscellaneous Expense

Attachment:- Assignment.rar