Lifestyle Lighting Ltd. reported the following on its balance sheet at December
ID: 2503712 • Letter: L
Question
Lifestyle Lighting Ltd. reported the following on its balance sheet at December 31, 2010:
Capital assets, at cost:
Land ............................................................................................. 150,000
Buildings....................................................................................... 400,000
Less Accumulated depreciation .......................................................(87,500)
Equipment .................................................................................... 600,000
Less Accumulated depreciation .......................................................(260,000)
In early July 2011, Lifestyle Lighting Ltd. expanded operations and purchased additional equip-
ment at a cost of $100,000. The company depreciates buildings by the straight-line method
over 20 years with residual value of $50,000. Due to obsolescence, the equipment has a useful
life of only 10 years and is being depreciated by the double-diminishing-balance method with
zero residual value.
Required
1. Journalize Lifestyle Lighting Ltd.'s capital equipment purchase and depreciation transac-
tions for 2011.
2. Report capital assets on the December 31, 2011, balance sheet.
Explanation / Answer
Lifestyle Lighting Ltd. reported the following on its balance sheet at December 31, 2010:
Capital assets, at cost:
Land ............................................................................................. 150,000
Buildings....................................................................................... 400,000
Less Accumulated depreciation .......................................................(87,500)
Equipment .................................................................................... 600,000
Less Accumulated depreciation .......................................................(260,000)
In early July 2011, Lifestyle Lighting Ltd. expanded operations and purchased additional equip-
ment at a cost of $100,000. The company depreciates buildings by the straight-line method
over 20 years with residual value of $50,000. Due to obsolescence, the equipment has a useful
life of only 10 years and is being depreciated by the double-diminishing-balance method with
zero residual value.
Required
1. Journalize Lifestyle Lighting Ltd.'s capital equipment purchase and depreciation transac-
tions for 2011.
Depreciation Expenses for Building = (400000-50000)/20 = 17500
Depreciation rate using double-diminishing-balance method = 1/10 * 2 = 20%
Depreciation Expenses on Secuity Equipment = 340000*20% + 100000*20%*2/4 = $ 78000
2. Report capital assets on the December 31, 2011, balance sheet.
Capital assets, at cost:
Land ............................................................................................. 150,000
Buildings....................................................................................... 400,000
Less Accumulated depreciation .......................................................(105,000)
Equipment .................................................................................... 700,000
Less Accumulated depreciation .......................................................(338,000)
100000
To Cash A/c
100000
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