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