A partial balance sheer is presented for Withers Industries Withers Industries P
ID: 2350766 • Letter: A
Question
A partial balance sheer is presented for Withers IndustriesWithers Industries
Partial Balance Sheet
December 31, 2008
Property, Plant & Equipment
Delivery Truck $35,000
Less Accumulated Deprecation (18,750) $16,250
Office Equipment $45,000
Less Accumulated Deprecation (35,280) 9,720
Factory Machinery 100,000
Less Accumulated Deprecation (36,800) 63,200
Total Property, Plant & Equipment $89,170
Intangible Assets
Patents $7,000
Notes:
- The delivery truck was purchased on June 30, 2006, and is being depreciated over four years using the straight-line method. Salvage value was estimated at $5,000.
- The office equipment was purchased on January 2, 2006, and is being depreciated over five years using the double-declining-balance method. Salvage value was estimated at $4,000.
- The factory machinery was purchased on January 2, 2005, and is being depreciated over ten years using the straight-line-method. Salvage value was estimated at $8,000.
- The remaining useful life on the patent is seven years.
(a) On July 31, 2009, Withers sold the delivery truck for $9,000 cash. Prepare and necessary journal entries to record this sale.
(b) On December 1, 2009, Withers purchased land and a building for a combined cost of $400,000 by paying $100,000 cash and signing a note for the balance. An appraiser estimates the values of the building and land are, respectively, $302,500 and $247,500. Withers plans to use the building for ten years, at which time the building will probably be worth $50,000. Withers plans to use straight-line depreciation on the building. Journalize this purchase.
(c) Record all necessary depreciation and amortization entries on December 31, 2009.
(d) Prepare a partial balance sheet for Withers on December 31, 2009.
(e) How did the 2009 transactions affect Withers
Explanation / Answer
Jan6. Dr. Truck 24000 Cr. Cash 24000 Jan19 Dr. Auto Repair expense 500 Cr. Cash 500 Dec31 Dr. Amortization expense 12000 Cr. Accumulated Amortization 12000 24000* .50 Double declining rate= 200%/4 years= .50 Year 2009 Jan 2 Dr. Truck-new 69000 Cr. Cash 69000 Aug1 Dr. Cash 10,250 Dr. Accumulated Amortization 15,500 Cr. Gain on sale 1,750 Cr. Truck-old 24,000 24000-12000(2008 depreciation)= 12000 12000*.50*7/12( Jan-July Depreciation) = 3500 12000+ 3500= 15500 Loss/gain= cash given- book value 10,250-(24000-15500) = 1750 Oct 24 Dr. Auto Repair Expense 415 Cr. Cash 415 Dec31 Dr. Amortization Exense 27600 Cr. Accumulated Amortization 27600 69000*.04= 27600 Double Declining rate= 200%/ 5 years= .40
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