The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. Year 1 Jan. 4 Purchased a used delivery truck for $28,000, paying cash. Nov. 2 Paid garage $675 for miscellaneous repairs to the truck. Dec. 31 Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck. Year 2 Jan. 6 Purchased a new truck for $48,000, paying cash. Apr. 1 Sold the used truck purchased on January 4 of Year 1 for $15,000. (Record depreciation to date in Year 2 for the truck.) June 11 Paid garage $450 for miscellaneous repairs to the truck. Dec. 31 Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. Year 3 July 1 Purchased a new truck for $54,000, paying cash. Oct. 2 Sold the truck purchased January 6, Year 2, for $16,750. (Record depreciation to date for Year 3 for the truck.) Dec. 31 Recorded depreciation on the remaining truck purchased on July 1. It has an estimated residual value of $12,000 and an estimated useful life of eight years. CHART OF ACCOUNTSLegacy Furniture Co.General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 114 Interest Receivable 115 Notes Receivable 116 Merchandise Inventory 117 Supplies 119 Prepaid Insurance 120 Land 123 Delivery Truck 124 Accumulated Depreciation-Delivery Truck 125 Equipment 126 Accumulated Depreciation-Equipment 130 Mineral Rights 131 Accumulated Depletion 132 Goodwill 133 Patents LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Owner's Capital 311 Owner's Drawing REVENUE 410 Sales 610 Interest Revenue 620 Gain on Sale of Delivery Truck 621 Gain on Sale of Equipment EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Delivery Truck 523 Delivery Expense 525 Truck Repair Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Equipment 533 Depletion Expense 534 Amortization Expense-Patents 535 Insurance Expense 536 Supplies Expense 539 Miscellaneous Expense 710 Interest Expense 720 Loss on Sale of Delivery Truck 721 Loss on Sale of Equipment Journalize the transactions and the adjusting entries.
The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. Year 1 Jan. 4 Purchased a used delivery truck for $28,000, paying cash. Nov. 2 Paid garage $675 for miscellaneous repairs to the truck. Dec. 31 Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck. Year 2 Jan. 6 Purchased a new truck for $48,000, paying cash. Apr. 1 Sold the used truck purchased on January 4 of Year 1 for $15,000. (Record depreciation to date in Year 2 for the truck.) June 11 Paid garage $450 for miscellaneous repairs to the truck. Dec. 31 Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. Year 3 July 1 Purchased a new truck for $54,000, paying cash. Oct. 2 Sold the truck purchased January 6, Year 2, for $16,750. (Record depreciation to date for Year 3 for the truck.) Dec. 31 Recorded depreciation on the remaining truck purchased on July 1. It has an estimated residual value of $12,000 and an estimated useful life of eight years. CHART OF ACCOUNTSLegacy Furniture Co.General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 114 Interest Receivable 115 Notes Receivable 116 Merchandise Inventory 117 Supplies 119 Prepaid Insurance 120 Land 123 Delivery Truck 124 Accumulated Depreciation-Delivery Truck 125 Equipment 126 Accumulated Depreciation-Equipment 130 Mineral Rights 131 Accumulated Depletion 132 Goodwill 133 Patents LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Owner's Capital 311 Owner's Drawing REVENUE 410 Sales 610 Interest Revenue 620 Gain on Sale of Delivery Truck 621 Gain on Sale of Equipment EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Delivery Truck 523 Delivery Expense 525 Truck Repair Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Equipment 533 Depletion Expense 534 Amortization Expense-Patents 535 Insurance Expense 536 Supplies Expense 539 Miscellaneous Expense 710 Interest Expense 720 Loss on Sale of Delivery Truck 721 Loss on Sale of Equipment Journalize the transactions and the adjusting entries.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 18P: Soon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett...
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.
| Year 1 | |
| Jan. 4 | Purchased a used delivery truck for $28,000, paying cash. |
| Nov. 2 | Paid garage $675 for miscellaneous repairs to the truck. |
| Dec. 31 | Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck. |
| Year 2 | |
| Jan. 6 | Purchased a new truck for $48,000, paying cash. |
| Apr. 1 | Sold the used truck purchased on January 4 of Year 1 for $15,000. (Record depreciation to date in Year 2 for the truck.) |
| June 11 | Paid garage $450 for miscellaneous repairs to the truck. |
| Dec. 31 | Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. |
| Year 3 | |
| July 1 | Purchased a new truck for $54,000, paying cash. |
| Oct. 2 | Sold the truck purchased January 6, Year 2, for $16,750. (Record depreciation to date for Year 3 for the truck.) |
| Dec. 31 | Recorded depreciation on the remaining truck purchased on July 1. It has an estimated residual value of $12,000 and an estimated useful life of eight years. |
CHART OF ACCOUNTSLegacy Furniture Co.General Ledger
| ASSETS | |
| 110 | Cash |
| 111 | Petty Cash |
| 112 | Accounts Receivable |
| 114 | Interest Receivable |
| 115 | Notes Receivable |
| 116 | Merchandise Inventory |
| 117 | Supplies |
| 119 | Prepaid Insurance |
| 120 | Land |
| 123 | Delivery Truck |
| 124 | |
| 125 | Equipment |
| 126 | Accumulated Depreciation-Equipment |
| 130 | Mineral Rights |
| 131 | Accumulated Depletion |
| 132 | |
| 133 | Patents |
| LIABILITIES | |
| 210 | Accounts Payable |
| 211 | Salaries Payable |
| 213 | Sales Tax Payable |
| 214 | Interest Payable |
| 215 | Notes Payable |
| EQUITY | |
| 310 | Owner's Capital |
| 311 | Owner's Drawing |
| REVENUE | |
| 410 | Sales |
| 610 | Interest Revenue |
| 620 | Gain on Sale of Delivery Truck |
| 621 | Gain on Sale of Equipment |
| EXPENSES | |
| 510 | Cost of Merchandise Sold |
| 520 | Salaries Expense |
| 521 | Advertising Expense |
| 522 | Depreciation Expense-Delivery Truck |
| 523 | Delivery Expense |
| 525 | Truck Repair Expense |
| 529 | Selling Expenses |
| 531 | Rent Expense |
| 532 | Depreciation Expense-Equipment |
| 533 | Depletion Expense |
| 534 | Amortization Expense-Patents |
| 535 | Insurance Expense |
| 536 | Supplies Expense |
| 539 | Miscellaneous Expense |
| 710 | Interest Expense |
| 720 | Loss on Sale of Delivery Truck |
| 721 | Loss on Sale of Equipment |
Journalize the transactions and the adjusting entries. Scroll down to access pages 2 and 3 of the journal. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
Journalize the Year 1 transactions and adjusting entries on Page 1.
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