a. On February 13, Scandia Co.paid $1,650 to install a hydraulic lift and $25 fo

Question

a.      On February 13, Scandia Co.paid $1,650 to install a hydraulic lift and $25 for an air filterfor one of its delivery trucks. Journalize the entries for thenew lift and air filter expenditures.  (Capitaland revenue expenditure entries)

b.      Equipment acquired at thebeginning of the year at a cost of $88,000 has been estimatedresidual value of $6,000 an estimated useful life of 5years. Determine (a) the depreciable cost, (b) the straight–line rate, and (c) the annual straight linedepreciation. ( straight- linedepreciation)       

Explanation / Answer

A.    Feb 13           Delivery truck    1,650    Cash       1,650 (capitalized to truck) Feb 13 Air filter expense    25 Cash          25 B. 1. Depreciable cost 88,000 -6,000 = $ 82,000 2.Straigh line rate      100 / 5 yrs = 20 % 3. Annual straight line depreciation      82,000/5     = $ 16,400. C.   1. Depreciable cost    316,000 - 48,000 = $ 268,000 2. Straightline rate 100 / 40 = 2.5 % 3. Annual straight line depreciation 268,000 / 40 = $ 6,700

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