Prepare journal entries in the books of F Delivery.
Explanation of Solution
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
- Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
Prepare journal entry for the transaction occurred on January 2, 2018.
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2018 | ||||||
January | 2 | Building | 175,000 | |||
Cash | 175,000 | |||||
(To record the purchase of building) |
Table (1)
Description:
- Building is an asset and it is increased by $175,000. Therefore, debit building account with $175,000.
- Cash is an asset and it is decreased by $175,000. Therefore, credit the cash account with $175,000.
Prepare journal entry for the transaction occurred on July 1, 2018.
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2018 | ||||||
July | 1 | Equipment | 40,000 | |||
Cash | 40,000 | |||||
(To record purchase of equipment) |
Table (2)
Description:
- Equipment is an asset and it is increased by $40,000. Therefore, debit equipment account with $40,000.
- Cash is an asset and it is decreased by $40,000. Therefore, credit the cash account with $40,000.
Prepare journal entry for the transaction occurred on October 13, 2018.
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2018 | ||||||
October | 13 | Repairs and Maintenance Expense | 500 | |||
Cash | 500 | |||||
(To record the payment of expense) |
Table (3)
Description:
- Repair expense is an expense account and it is increased by $500. Expenses are the component of
stockholder’s equity and it decreases the value of equity. Therefore, debit repair expenses account with $500. - Cash is an asset and it is decreased by $500. Therefore, credit the cash account with $500.
Prepare journal entry for the transaction occurred on October 13, 2018.
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2018 | ||||||
October | 13 | Repairs and Maintenance Expense | 150 | |||
Cash | 150 | |||||
(To record payment of expense) |
Table (4)
Description:
- Repair expense is an expense account and it is increased by $150. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit repair expenses account with $150.
- Cash is an asset and it is decreased by $150. Therefore, credit the cash account with $150.
Prepare journal entry for the transaction occurred on December 1, 2018.
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
2018 | ||||||
December | 1 | Franchise Rights | 90,000 | |||
Cash | 90,000 | |||||
(To record purchase of franchise rights) |
Table (5)
Description:
- Franchise Rights is an asset and it is increased by $90,000. Therefore, debit the franchise rights account with $90,000.
- Cash is an asset and it is decreased by $90,000. Therefore, credit the cash account with $90,000.
Prepare journal entry for the
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2018 | ||||||
December | 31 | Depreciation Expense–Building (1) | 17,500 | |||
Depreciation Expense–Equipment (2) | 3,200 | |||||
Amortization Expense (3) | 1,500 | |||||
17,500 | ||||||
Accumulated Depreciation–Equipment | 3,200 | |||||
Accumulated Amortization | 1,500 | |||||
(To record depreciation expense and amortization expense) |
Table (6)
Description:
- Depreciation expense is an expense account and it is increased by $17,500. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit depreciation expenses account with $17,500.
- Depreciation expense is an expense account and it is increased by $3,200. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit depreciation expenses account with $3,200.
- Amortization expense is an expense account and it is increased by $1,500. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit amortization expenses account with $1,500.
- Accumulated depreciation–building is a contra-asset account and would have a normal credit balance. Therefore, credit accumulated depreciation account with $17,500.
- Accumulated depreciation– equipment is a contra-asset account and would have a normal credit balance. Therefore, credit accumulated depreciation account with $3,200.
- Accumulated amortization is a contra-asset account and would have a normal credit balance. Therefore, credit accumulated amortization account with $1,500.
Working note (1):
Determine the depreciation expense for building under double-declining-balance method, if cost of building is $175,000, useful life is 20 years, and accumulated depreciation is $0.
Working note (2):
Determine the depreciation expense for equipment for 6 months (July 1 to December 31) under straight-line method, if cost of equipment is $40,000, useful life is 5 years, and residual value is $8,000.
Working note (3):
Determine amortization expense for 1 month (from December 1 to December 31), if cost of franchise right is $90,000, and useful life is 5 years.
Prepare journal entry for the depreciation expense as on June 30, 2019.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2019 | ||||||
June | 30 | Depreciation Expense–Building (4) | 7,875 | |||
Accumulated Depreciation–Building | 7,875 | |||||
(To record the depreciation expense) |
Table (7)
Description:
- Depreciation expense is an expense account and it is increased by $7,875. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit depreciation expenses account with $7,875.
- Amortization expense is an expense account and it is increased by $7,875. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit amortization expenses account with $7,875.
Working note (4):
Determine the depreciation expense for building for 6 months (December 31, 2018 to June 30, 2019) under straight-line method, if cost of building is $175,000, useful life is 20 years, and accumulated depreciation is $17,500.
Prepare journal entry for the sale of building on June 30, 2019.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2019 | ||||||
June | 30 | Cash | 140,000 | |||
Accumulated Depreciation–Building | 25,375 | |||||
Loss on Disposal (6) | 9,625 | |||||
Building | 175,000 | |||||
(To record sale of building) |
Table (8)
Description:
- Cash is an asset and it is increased by $140,000. Therefore, credit the cash account with $140,000.
- Accumulated depreciation– equipment is a contra-asset account and would have a normal credit balance. Since the equipment is sold, the accumulated depreciation balance is reversed to reduce the building account balance. Hence, the accumulated depreciation account is debited with $25,375.
- Loss on disposal is an expense account and it is increased by $9,625. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit depreciation expenses account with $9,625.
- Building is an asset and it is decreased by $175,000. Therefore, credit the equipment account with $175,000.
Working note (5):
Determine the gain on sale.
Compute book value on the date of sale.
Working note (6):
Compute gain (loss) on sale.
Prepare journal entry for the depreciation expense and amortization expense as on December 31, 2019.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
2019 | ||||||
December | 31 | Depreciation Expense–Equipment | 6,400 | |||
Amortization Expense | 18,000 | |||||
Accumulated Depreciation–Equipment | 6,400 | |||||
Accumulated Amortization | 18,000 | |||||
(To record depreciation expense and amortization expense) |
Table (9)
Description:
- Depreciation expense is an expense account and it is increased by $6,400. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit depreciation expenses account with $6,400.
- Amortization expense is an expense account and it is increased by $18,000. Expenses are the component of stockholder’s equity and it decreases the value of equity. Therefore, debit amortization expenses account with $18,000.
- Accumulated depreciation– equipment is a contra-asset account and would have a normal credit balance. Therefore, credit accumulated depreciation account with $6,400.
- Accumulated amortization is a contra-asset account and would have a normal credit balance. Therefore, credit accumulated amortization account with $18,000.
Note: Refer to Table (6) for all the values.
Want to see more full solutions like this?
Chapter 9 Solutions
Connect Access Card for Fundamentals of Financial Accounting
- When depreciation is recorded each period, what account is debited? a. Depreciation Expense b. Cash c. Accumulated Depreciation d. The fixed asset account involved Use the following information for Multiple-Choice Questions 7-4 through 7-6: Cox Inc. acquired a machine for on January 1, 2019. The machine has a salvage value of $20,000 and a 5-year useful life. Cox expects the machine to run for 15,000 machine hours. The machine was actually used for 4,200 hours in 2019 and 3,450 hours in 2020.arrow_forwardExpenditures After Acquisition Listed below are several transactions: a. Paid $80 cash to replace a minor part of an air conditioning system. b. Paid $40,000 to fix structural damage to a building. c. Paid $8,000 for monthly salaries. d. Paid $12,000 to replace a manual cutting machine with a computer-controlled machine. e. Paid $1,000 related to the annual painting of a building. Required: Classify each transaction as either a revenue expenditure, a capital expenditure, or neither.arrow_forwardIMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, Dans Demolition purchased two jackhammers for 2,500 each with a salvage value of 100 each and estimated useful lives of four years. On January 1, 20-2, a stronger blade to improve performance was installed in Jackhammer A for 800 cash and the compressor was replaced in Jackhammer B for 200 cash. The compressor is expected to extend the life of Jackhammer B one year beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Jackhammers A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each jackhammer for 20-2 through 20-4.arrow_forward
- Akron Incorporated purchased an asset at the beginning of Year 1 for 375,000. The estimated residual value is 15,000. Akron estimates that the asset has a service life of 5 years. Calculate the depreciation expense using the sum-of-the-years-digits method for Years 1 and 2 of the assets life.arrow_forwardGroup and Composite Depreciation Chcadle Company purchased a fleet of 20 delivery trucks for 8,000 each on January 2, 2019. It decided to use composite depreciation on a straight-line basis and calculated the depreciation from the following schedule: Cheadle actually retired the trucks according to the following schedule (assume each truck was retired at the beginning of the year): Required: 1. Prepare the journal entries necessary to record the preceding events. 2. Assume that the company expected all the trucks to last 4 years and be retired for 1,600 each. Using group depreciation, prepare journal entries for all 6 years, assuming the company retired the trucks as shown by the latter schedule.arrow_forward
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning