The following transactions and adjusting entries were completed by a paper-packa
ID: 2512788 • Letter: T
Question
The following transactions and adjusting entries were completed by a paper-packaging company called Gravure Graphics International during 2015 and 2016. The company uses straight-line depreciation for trucks and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents Paid $91,000 cash to purchase storage shed components. Paid $2,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $5,000 Paid $34,000 cash to purchase a pickup truck for use in the business. The truck has an estimated useful life of five years and a residual value of $3,000. Paid $600 cash for repairs to the pickup truck. Paid $24,000 cash to purchase patent rights on a new paper bag manufacturing process. The patent is estimated to have a remaining useful life of five years Recorded depreciation and amortization on the pickup truck, storage shed, and patent. Sold the pickup truck for $29,000 cash. (Record the depreciation on the truck prior to recording its disposal.) Recorded depreciation on the storage shed. Determined that the patent was impaired and wrote off its remaining book value (i.e., wrote down the book value to zero January January 2, 2015 3, 2015 1, 2015 13, 2015 April May July 1, 2015 December 31, 2015 June30, 2016 December 31, 2016 Required Prepare the journal entries required on each of the above dates. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)Explanation / Answer
Journal entries
date
explanation
debit
credit
2-Jan
building
91000
cash
91000
3-Jan
building
2000
cash
2000
1-Apr
truck
34000
cash
34000
13-May
repair expense
600
cash
600
1-Jul
patent
24000
cash
24000
31-Dec
depreciation expense-truck
4650
depreciation expense-building
17600
accumulated depreciation
22250
31-Dec
amortization expense-patent
2400
accumulated amortization expense
2400
30-Jun
depreciation expense
3100
accumulated depreciation-truck
3100
30-Jun
cash
29000
accumulated depreication-truck
7750
truck
34000
gain on sale of truck
2750
cost of building
91000
31-Dec
depreciation expense-building
14080
erection charges
2000
accumulated depreciation
14080
less scrap value
5000
amount to be depreciated
88000
31-Dec
amortization expense-patent
4800
straignt line depreciation rate
1/10
10%
accumulated amortization expense
4800
double declining rate
10*2
20%
31-Dec
accumulated amortization expense-patent
7200
year
amount to be depreciated
rate of depreciation
annual depreciation
year end book value
loss on impairment of patent
16800
1
88000
20%
17600
70400
patent
24000
2
70400
20%
14080
56320
Journal entries
date
explanation
debit
credit
2-Jan
building
91000
cash
91000
3-Jan
building
2000
cash
2000
1-Apr
truck
34000
cash
34000
13-May
repair expense
600
cash
600
1-Jul
patent
24000
cash
24000
31-Dec
depreciation expense-truck
4650
depreciation expense-building
17600
accumulated depreciation
22250
31-Dec
amortization expense-patent
2400
accumulated amortization expense
2400
30-Jun
depreciation expense
3100
accumulated depreciation-truck
3100
30-Jun
cash
29000
accumulated depreication-truck
7750
truck
34000
gain on sale of truck
2750
cost of building
91000
31-Dec
depreciation expense-building
14080
erection charges
2000
accumulated depreciation
14080
less scrap value
5000
amount to be depreciated
88000
31-Dec
amortization expense-patent
4800
straignt line depreciation rate
1/10
10%
accumulated amortization expense
4800
double declining rate
10*2
20%
31-Dec
accumulated amortization expense-patent
7200
year
amount to be depreciated
rate of depreciation
annual depreciation
year end book value
loss on impairment of patent
16800
1
88000
20%
17600
70400
patent
24000
2
70400
20%
14080
56320
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