BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
71 views

Dinnell Company owns the following assets:

Chapter 11, Problem 7P, Dinnell Company owns the following assets: In the year of acquisition and retirement of an asset,

In the year of acquisition and retirement of an asset, Dinnell records depreciation expense for one-half year. During 2020, Asset A was sold for $7,000.

Required:

Prepare the journal entries to record depreciation on each asset for 2017 through 2020 and the sale of Asset A. Round all answers to the nearest dollar.

To determine

Prepare necessary journal entries of Company D for 2017 through 2020.

Explanation

Depreciation expense: Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolesces.

Straight-line depreciation method: The depreciation method which assumes that the consumption of economic benefits of long-term asset could be distributed equally throughout the useful life of the asset is referred to as straight-line method.

Sum-of- the-years’ digits method:  Sum-of-the years’ digits method determines the depreciation by multiplying the depreciable base and declining fraction.

Double-declining-balance method: The depreciation method which assumes that the consumption of economic benefits of long-term asset is high in the early years but gradually declines towards the end of its useful life is referred to as double-declining-balance method.

Prepare necessary journal entries of Company D for 2017 through 2020 as follows:

DateAccount Title & ExplanationDebit ($)Credit($)
Asset A:
2017Depreciation expense (2)1,800
 Accumulated depreciation1,800
 (To record the depreciation expense incurred at the end of the accounting year)
2018Depreciation expense (1)3,600
 Accumulated depreciation3,600
 (To record the depreciation expense incurred at the end of the accounting year)
2019Depreciation expense (1)3,600
 Accumulated depreciation3,600
 (To record the depreciation expense incurred at the end of the accounting year)
2020Depreciation expense (2)1,800 
 Accumulated depreciation 1,800
 (To record the depreciation expense incurred at the end of the accounting year)
 Cash7,000
 Accumulated depreciation (3)10,800
 

Loss on disposal of property, plant and equipment

[$20,000$10,800$7,000]

2,200
 Machinery/Equipment20,000
 (To record the sale of Asset A)
Asset B:
2018Depreciation expense (6)4,444
 Accumulated depreciation4,444
 (To record the depreciation expense incurred at the end of the accounting year)
2019Depreciation expense ($4,444+$3,889)8,333
 Accumulated depreciation8,333
 (To record the depreciation expense incurred at the end of the accounting year)
2020Depreciation expense ($3,889+$3,333)7,222
 Accumulated depreciation7,222
 (To record the depreciation expense incurred at the end of the accounting year)
Asset C:
2019Depreciation expense (8)10,000
 Accumulated depreciation10,000
 (To record the depreciation expense incurred at the end of the accounting year)
2020Depreciation expense (9)18,000
 Accumulated depreciation18,000
 (To record the depreciation expense incurred at the end of the accounting year)

Table (1)

Working note (1):

Calculate the annual depreciation expense for Asset A under straight line method.

Depreciation expenses=Acquisition cost – Residual valueUseful life =$20,000$2,0005 years=$3,600 per year

Working note (2):

Calculate the half-year depreciation expense for Asset A under straight line method.

Depreciation expenses=[Acquisition cost – Residual valueUseful life×12] =$20,000$2,0005 years×12=$1,800

Working note (3):

Calculate the accumulated depreciation of asset A

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Why do products have to be deleted from a product mix?

Foundations of Business (MindTap Course List)

REAL OPTIONS Use a spreadsheet model to evaluate the project analyzed in problem 13-7.

Fundamentals of Financial Management (MindTap Course List)

Explain the meaning of a bond price quotation of 95. Of 102.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

What does TELOS stand for? How is it helpful?

Pkg Acc Infor Systems MS VISIO CD

RECEIVABLES INVESTMENT Lamar Lumber Company has sales of 10 million per year, all on credit terms calling for p...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)