Problem 2 A piece of equipment costs $10,000 and has a residual (salvage value)

Question

Problem 2 A piece of equipment costs $10,000 and has a residual (salvage value) of zero. It has a life of 5 years.   (use the straight-line method) A.) What is the depreciation Expense for year 1?        What is the depreciation Expense for year 2?        What is Accumulated depreciation at the end of year 2? B.) If we sold the piece of equipment at the end of year 2, what would be the journal entry?        The selling price is $9,000. Debit Credit Problem 3 We purchase a piece of equipment by issuing a $10,000, 90-day note which was discounted at the rate of 6%. A) What is the journal entry for the purchase of the equipment? Debit Credit B) What is the journal entry for the payment of the note payable? Debit Credit Problem 4 We sold ABC company merchandise on account for $12,000 They were unable to pay it so we changed it to a notes receivable for 30 days at 7%. A) What is the journal entry to change the AR to a NR Debit Credit B) What is the journal entry to show receiving the payment for the note receivable and interest? Debit Credit Problem 2 A piece of equipment costs $10,000 and has a residual (salvage value) of zero. It has a life of 5 years.   (use the straight-line method) A.) What is the depreciation Expense for year 1?        What is the depreciation Expense for year 2?        What is Accumulated depreciation at the end of year 2? B.) If we sold the piece of equipment at the end of year 2, what would be the journal entry?        The selling price is $9,000. Debit Credit Problem 3 We purchase a piece of equipment by issuing a $10,000, 90-day note which was discounted at the rate of 6%. A) What is the journal entry for the purchase of the equipment? Debit Credit B) What is the journal entry for the payment of the note payable? Debit Credit Problem 4 We sold ABC company merchandise on account for $12,000 They were unable to pay it so we changed it to a notes receivable for 30 days at 7%. A) What is the journal entry to change the AR to a NR Debit Credit B) What is the journal entry to show receiving the payment for the note receivable and interest? Debit Credit

Explanation / Answer

a)

b)

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Cost of Equipment $ 10,000 Less; Salvage value $             - Depreciable value $ 10,000 Life of assets 5 Years Depreciation per year ($10,000/5) $    2,000 Depreciation for 1st Year $    2,000 Depreciation for 2nd Year $    2,000 Accumulated depreciation on 2nd year ($2,000+$2,000) $    4,000

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