Question

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. 2018 January 2 Paid $183,000 cash to purchase a small warehouse building near the airport. The building has an estimated s life of 20 years and a residual value of $3,600. July 1 Paid $51,000 cash to purchase a delivery van. The van has an estimateſ useful life of five years and a residual value of $10,200. October 2 Paid $600 cash to paint a small office in the warehouse building. October 13 Paid $100 cash to get the oil changed in the delivery van. December 1 Paid $78,000 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. December 31 Recorded depreciation and amortization on the delivery van, warehouse building, and franchise right. 2019 June 30 Sold the warehouse building for $146,000 cash. (Record the depreciation on the building prior to recording its disposal. December 31 Recorded depreciation on the delivery van and amortization on the franchise right. Determined that the MELE franchise right was not impaired in value. Required: Prepare the journal entries required on each of the above dates. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Answer 1

Solution: Journal Entries

Date	Account Titles and Explanation	Debit	Credit
Jan.2,2018	Warehouse Building	$   183,000
	Cash		$    183,000
	(Being Warehouse Building purchased)
Jul.1,2018	Delivery Van	$     51,000
	Cash		$      51,000
	(Being Delivery Van purchased)
Oct.2,2018	Warehouse Building Expense	$           600
	Cash		$            600
	(Being Building expense paid)
Oct.13,2018	Delivery Van Expense	$           100
	Cash		$            100
	(Being Delivery Van expense paid)
Dec.1,2018	Franchise	$     78,000
	Cash		$      78,000
	(Being franchise right purchased)
Dec.31,2018	Depreciation	$     18,300
	Accumulated Depreciation-Warehouse Building		$      18,300
	( Being Depreciation)
Dec.31,2018	Depreciation	$        4,080
	Accumulated Depreciation-Delivery Van		$         4,080
	( Being Depreciation)
Dec.31,2018	Amortization	$        1,300
	Accumulated Amortization - Franchise		$         1,300
	( Being Amortization)
Jun.30,2019	Depreciation	$        8,235
	Accumulated Depreciation-Warehouse Building		$         8,235
	( Being Depreciation)
Jun.30,2019	Cash	$   146,000
	Accumulated Depreciation-Warehouse Building	$     26,535
	Loss on sold Warehouse Building	$     10,465
	Warehouse Building		$    183,000
Dec.31,2019	Depreciation	$        8,160
	Accumulated Depreciation-Delivery Van		$         8,160
	( Being Depreciation)
Dec.31,2019	Amortization	$     15,600
	Accumulated Amortization - Franchise		$      15,600
	( Being Amortization)

Note:

1) Calculation of Building depreciation and disposal

Date	Particulars	Total Cost	Accumulated Depreciation	Book Value	Depreciable Months	Depreciation	Book Value After Depreciation	Selling Price	Gain/loss
Dec.31,2018	Purchased	$        183,000	$                    -	$        183,000	12 Months	$        18,300	$        164,700
Jun.30,2019	Sold Equipment	$        183,000	$           18,300	$        164,700	6 Months	$          8,235	$        156,465	$ 146,000	$ (10,465)

2) Warehouse Building was purchased on January 2nd which is one day less than the year for the purpose of calculating depreciation. Here we have taken one year depreciation instead of 364 days out of 365 days depreciation.

Disclaimer:

1) If u want depreciation on Warehouse Building on days basis , please comment below. I will do the needful.