EX 9-16 Capital expenditure and depreciation OBJ. 1, 2 Willow Creek Company purc

Question

EX 9-16 Capital expenditure and depreciation OBJ. 1, 2 Willow Creek Company purchased and installed carpet in its new general offices on April 30 for a total cost of $18,000. The carpet is estimated to have a 15-year useful life and no residual value.

A. Prepare the journal entry necessary for recording the purchase of the new carpet.

B. Record the December 31 adjusting entry for the partial-year depreciation expense for the carpet, assuming that Willow Creek Company uses the straight-line method.

Explanation / Answer

A. Carpet A/c Dr..................18000

To Bank A/c ...................18000

B. Partial Year Depreciation = (18000/15) * 8/12 = 800.00

>> Depreciation A/c Dr.............800

To Carpet A/c ....................800

>> Profit & Loss A/c Dr.............800

To Depreciation A/c .............800

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