On its December 31, 2014 year-end financial statements, Canade Inc reported the

Question

On its December 31, 2014 year-end financial statements, Canade Inc reported the following accounts in its general ledger:

Building (note 1)

$600,000

Accumulated Depreciation – Building

$150,000

Equipment (note 2)

$230,000

Accumulated Depreciation - Equipment

$69,000

Vehicles (note 3)

$45,000

Accumulated Depreciation – Vehicles

$45,000

Note 1: The Building was acquired on January 1, 2009 and is being depreciated over its estimated useful life using the straight line method. An estimated residual value of $100,000 is used to calculate depreciation expense for this asset.

Note 2: The equipment, which was acquired on January 1, 2014, is being depreciated using the declining balance method. Canade Inc. estimates a residual value of $20,000 for this equipment.

Note 3: Canade Inc. depreciates vehicles on a straight-line basis over their estimated useful lives. Vehicles on hand on December 31, 2014 were fully depreciated.

Note 4: When assets are acquired or disposed of midway through a fiscal year, Canade Inc. prorates annual depreciation for the number of months the asset was owned during the year.

REQUIRED 1: Record (Journalize) the following transactions for the 2015 fiscal year:

January 31st, 2015: The vehicles were sold for proceeds of $8,000.

March 1, 2015: A new vehicle was purchased for $35,000 cash. The new vehicle has an estimated useful life of 7 years and no residual value.

June 30, 2015: Canade Inc. decided to sell its building and enter into a leasing arrangement. The building was sold for $600,000.

REQUIRED 2: Calculate and record journal entries for 2015 depreciation, assuming that depreciation is recorded each fiscal year-end. (ie – except in the event of a disposal of a capital asset, depreciation entries are only recorded at a fiscal year-end)

Show detail calculations to support your work.

REQUIRED 3: Complete the table below to show the balances that would be reported in the December 31, 2015 general ledger of Canade Inc.

Building (note 1)

Accumulated Depreciation – Building

Equipment (note 2)

Accumulated Depreciation - Equipment

Vehicles (note 3)

Accumulated Depreciation – Vehicles

Building (note 1)

$600,000

Accumulated Depreciation – Building

$150,000

Equipment (note 2)

$230,000

Accumulated Depreciation - Equipment

$69,000

Vehicles (note 3)

$45,000

Accumulated Depreciation – Vehicles

$45,000

Explanation / Answer

On its December 31, 2014 year-end financial statements, Canade Inc reported the

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