Randy’s restaurant Randy’s restaurant Randy’s restaurant Question 5 (of 5) 30.00

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Randy’s restaurant Randy’s restaurant Randy’s restaurant Question 5 (of 5) 30.00 polnts The following transactions and adjusting entries were completed by a local delivery company called Fast Delivery. The company uses straight-line depreciation for delivery vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for franchise rights. Paid $178,000 cash to purchase a small warehouse building near the airport. The building has an estimated life of 20 years and a residual value of $3,800 Paid $48.000 cash to purchase a delivery van. The van has an estimated useful life of five years and a residual value of $9,200 Paid $000 cash to paint a smail office in the warehouse building Paid $200 cash to get the oil changed in the delivery van Paid $85,500 cash to UPS to begin operating Fast Delivery business as a franchise using the name The UPS Store. This franchise right expires in five years January 2.2015 July 1.2015 October2. 2015 October 13, 2015 December 1,2015 December 31.2015 Recorded depreciation and amortization on the delivery van, warehouse building June 30. 2018 Sold the warehouse building for S142.000 cash. (Record the depreciation on the December 31. 2018 Recorded depreciation on the delivery van and amortization on the franchise right and franchise right building prior to recording its disposal) Determined that the franchise right was not impaired in vaue Required: Prepare the journal entries required on each of the above transactionievent, select "No Journat Entry Required in the first account fietd. Do not round intermediate cafcuiations. dates. (if no entry is required for a View transaction Est Journal entry worksheet Record the sals of the warehouse building for $142.000 cash. 0

Explanation / Answer

Journal Entries :-

Working Note 1 :-

Calculate Depreciation Exp. on Building :-

Depreciation Rate Using Double Declining Method = 1/5 * 2 * 100 = 40%

Dep. on Building for 2015 = $178000 * 40% = $71200

Dep. on Building for 2016 = ($178000 - $71200) * 40% * 6/12 = $21360

Working Note 2 :-

Depreciation on Delivery Van :-

Dep. on Delivery Van for 2015 = ((Cost - Residual Value) / Usefule Life) * 6/12

= ((46000 - 9200)/5)*(6/12)

= $3680

Depreciation on Delivery Van for 2016 = $3680 * 2 = $7360

Working Note 3 :-

Amortization Expense on franchise rigths :-

Amortization using Straight line method = (($85500 - $0)/5) * (1/12) = $1425

Date Particulars Debit ($) Credit ($) Jan 1 Building A/c Dr. 178000 To Cash 178000 Jul 1 Delivery Van A/c Dr. 46000 To Cash 46000 Oct 2 Painting Expense 600 To Cash 600 Oct 13 Oil Expense 200 To Cash 200 Dec. 1 Franchise Right 85500 To Cash 85500 Dec. 31 Depreciation Exp. (Building) (Working Note 1) 71200 To Accumulated Depreciation 71200 Dec 31 Depreciation Exp. (Delivery Van)(Working Note 2) 3680 To Accumulated Depreciation 3680 Dec 31 Amortization Expense (Working Note 3) 1425 To Franchise Right 1425 Dec. 31, 2015 Depreciation Expense (Building)(Working Note 1) 21360 To Accumulated Depreciation 21360 Jun 30, 2016 Cash 142000 To Building($178000 - $71200 - $21360) 85440 To Profit on sale of Building 56560    Dec 31, 2016 Depreciation Expense (Working note 2) 7360 To Accumulated Depreciation (Delivery Van) 7360 Dec 31 Amortization Expense (1425 * 12) 17100 To Franchise Right 17100

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