The following transactions and adjusting entries were completed by a paper-packa

Question

The following transactions and adjusting entries were completed by a paper-packaging company called Gra e company uses straight-line depreciation for trucks and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents 2018 January 2 Paid $98,e00 cash to purchase storage shed components. Danuary 3 Paid $s,oca cash to have the storage shed erected. The storege shed has an estimated life of 19 years and a residual value of $6,000 years and a residual value of $4,e00. remaining useful life of five years April 1 Paid $44,800 cash to purchase a pickup truck for use in the business. The truck has an estimated useful life of five May 13 Paid $800 cash for minor repairs to the pickup truck's upholstery Duly 1 Paid $17,000 cash to purchase patent rights on a new papen bag manufacturing process. The patent is estínated to have a December 31 Recorded depreciation and amortization on the pickup truck, storage shed, and patent. 2019 Dune 3e Sold the pickup truck for $37,00 cash. (Record the depreciotion on the truck prior to recording its disposal.) December 31 Recorded depreciation on the storage shed. Also determined that the patent was impaired and wrote off its remaining book value (i.e., "rote down the book value to zero); Required Prepare the journal entries required on each of the above dates. (If no entry is required for a transaction/event, select "No Journel Entry Required" in the first account field. Do not round intermediate calculations.)

Explanation / Answer

Solution:

Journal Entries - Paper Pakaging Company Date Particulars Debit Credit 2-Jan-18 Building Dr $98,000.00         To Cash $98,000.00 (To record purchase of Storage shed) 3-Jan-18 Building Dr $3,000.00         To Cash $3,000.00 (To record erection of storage shed) 1-Apr-18 Truck Dr $44,000.00         To Cash $44,000.00 (To record purchase of truck) 13-May-18 Repair & Maintenance expense Dr $800.00         To Cash $800.00 (To record repair expense on truck) 1-Jul Patent Dr $17,000.00         To Cash $17,000.00 (To record purchase of patent) 31-Dec Deprecation expense Dr $26,200.00 Amortization expense Dr $1,700.00         To Accumulated depreciation - Truck [($44,000-$4,000)/5*9/12] $6,000.00         To Accumulated depreciation - Building ($101,000*20%) $20,200.00         To Accumulated Amortization - Patent ($17,000/5*6/12) $1,700.00 (To record depreciation on truck, building and patent) 30-Jun-19 Deprecation expense Dr $4,000.00         To Accumulated depreciation - Truck [($44,000-$4,000)/5*6/12] $4,000.00 (To record depreciation upto date of sale) 30-Jun-19 Cash Dr $37,000.00 Accumulated depreciation - Truck Dr $10,000.00         To Truck $44,000.00         To Gain on sale of assets $3,000.00 (To record sales of truck) 31-Dec-19 Deprecation expense Dr $16,160.00         To Accumulated depreciation - Building [($101,000-20200)*20%] $16,160.00 (To record depreciation on storage shed) 31-Dec-19 Amortization expense Dr $3,400.00         To Accumulated Amortization - Patent ($17,000/5) $3,400.00 (To record amortization expense on patent) 31-Dec-19 Impairment loss Dr $11,900.00         To Accumulated Amortization - Patent ($17,000 - $5,100) $11,900.00 (To record impairment loss on patent)

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