Help.. I got a lot of parts wrong after grading and would like it answered and e
ID: 2477045 • Letter: H
Question
Help.. I got a lot of parts wrong after grading and would like it answered and explained..
June 2 Bill 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. Bill paid $2,000 down and financed the remaining purchase price with a 5% 5 year note.
June 4 Bill purchased a trailer to haul lawn care equipment for $2,300; estimated life is 5 years with no salvage value. Bill paid for the purchase in cash.
June 5 Bill purchased a gas powered trimmer for $1,200 and a commercial leaf-blower for $1,500. Bill estimates they will each have a two year life and no salvage value. Bill paid for both of these pieces of equipment on account.
These are in addition to the three assets Bill 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 $0
Depreciation was recorded in May for these assets using the straight-line method however Bill is considering other depreciation methods and has asked you to prepare a comparison of the straight-line method with the double declining balance (200% DDB) method before he decides.
Instructions:
Using the chart of accounts provided below and the Excel template provided with this assignment, record the transactions for the new assets purchased in June, 2014. Start with Page 7 for the journal entries.Explanations are optional.
Prepare a monthly schedule of depreciation for each of the seven assets for 2014 using 1) straight-line and 2) 200% DDB.(Assume assets purchased before the 15th of the month will be depreciated as if owned for the entire month). Remember that you are calculating monthly depreciation, not annual and adjust your depreciation rate.Carry your depreciation rate to four decimals and round the depreciation expense to two decimals.
Bill has decided that equipment will be depreciated using straight-line and the building using 200% DDB.Prepare the adjusting journal entries for depreciation for the month of June, 2014. Start with Page 8 for the adjusting journal entries.Explanations are optional.
Explanation / Answer
1. STRAIGHT LINE DEPRECIATION FOR ASSETS PURCHASED IN THE MONTH OF MAY 2014.(IN$)
___________________________________________________________________________________________
S.NO. NAME OF ASSET COST SALVAGE VALUE ESTIMATED LIFE DEP. FOR MAY
1 TRUCK 5000 500 5 YEARS 5000-500/5 X12 = 75
2. LAWN MOWER 300 0 2 YEARS 300/2 X 12 = 12.5
3 AERATOR 500 0 2 YEARS 500/2 X 12 20.83
______________________________________________________________________________________________
S.NO NAME OF ASSET COST USEFUL LIFE SLM RATE DDB RATE DEP. FOR MAY
COST OFEQUIPMENT = $2,300
DEPRECIATION ON SLM BASE = 2,300/5 X 12 = $28.33:
UNDER DOUBLE DECLAINING METHOD = 2,300 X 40%/12 = $76.67
CALCULAITON OF DEPRECIAITON ON TRIMMER PURCHASED ON JUNE 5
COST OF EQUIPMENT = $1200; USEFUL LIFE = 2 YEARS ;
SLM DEPRECIATION FOR JUNE = 1200/2 X 12 =$50; DEPRECAITON AS PER DDM = 1200 X 100%/12 =$100
DEPRECIATION ON LEAF BLOWER FOR THE MONTH OF JUNE:
COST OF LEAF BLOWER = $1500; USEFUL LIFE = 2 YERS
DEPRECATION UNDER SLM = 1500 X 50% /12 = $62.5 ; UNDER DDM = 1500 X 100%/12 = $125
*TOTAL DEPRECIATION FOR JUNE = BUILDING $616.67 + EQUIPMENT 28.33 + TRIMMER 50 + LEAF BLOWER 62.5 = $757.50
TOTAL DEPRECIATION FOR THE MONTH OF JUNE ON ASSETS PURCHASED IN THE MONTH OF MAY
= $108.33 (DEPRECIATION AMOUNT IS SAME AS THAT OF MAY AS THE METHOD IS SLM)
HENCE, TOTAL DEPRECIAITON FOR THE MONTH OF JUNE FOR BOTH ASSETS PURCHASED IN MAY AND JUNE: = $108.33 + 757.50 = $865.83
ADJUSTMENT JOURNAL ENTRY FOR THE MONTH OF JUNE:
DEPRECAITON 865.83
ACCUMULATED DEPRECIAITON 865.83
(DEPRECIAITON RECORDE FOR THE MONTH OF JUNE ON SEVEN ASSETS)
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