Question

AutoSave Of H B File Home Power View Insert Dra M . Calibri - 14 - A À 5 BI U - - - A - Paste Clipboard Font Q41 A B C D E F G H J K L M A depreciation schedule for heavy equipment of Beniluz Road Construction Company was requested by your auditor soon after December 31, 2021, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2018 to 2021, inclusive. The following data were ascertained: Balance of Equipment account, Jan. 1, 2018 Equipment No. 1 purchased Jan. 1, 2015, cost $ 50,000 Equipment No. 2 purchased July 1, 2015, cost 60,000 Equipment No. 3 purchased Jan. 1, 2016, cost 55,000 Equipment No. 4 purchased July 1, 2017, cost 70,000 Balance, Jan. 1, 2018 $235,000 The Accumulated Depreciation Equipment account previously adjusted to January 1, 2018, and entered in the ledger, had a balance on that date of $89,000 (depreciation on the four pieces of equipment from the respective dates of purchase, based on a 5-year life, no salvage value). No charges had been made against the account before January 1, 2018. Transactions between January 1, 2018, and December 31, 2021, which were recorded in the ledger, are as follows: Jan. 1, 2019 Equipment No. 1 was sold for $6,000 cash; entry debited Cash and credited Equipments, $6,000. July 1, 2019 Equipment No. 2 was traded for a larger one (No. 5), the agreed purchase price of which was $80,000. Beniluz Road Construction Co. paid the dealer $66,000 cash on the transaction. The entry was a debit to Equipment and a credit to Cash, $66,000. The transaction has commercial substance. July 1, 2020 Equipment No. 3 was damaged in a wreck to such an extent that it was sold as junk for $500 cash. Beniluz Road Construction Co. received $12,000 from the insurance company. The entry made by the bookkeeper was a debit to Cash, $12,500, and credits to Miscellaneous Income, $500, and Equipment, $12,000. July 1, 2021 A new Equipment (No. 6) was acquired for $92,000 cash and was charged at that amount to the Equipment account. Entries for depreciation had been made by the bookkeeper at the close of each year as follows: 2018, $47,000; 2019, $42,600; 2020, $32,700; 2021, $35,400. Question Part 1 Answer Sheet Par O Type here to search

Answer 1

														Correct entry					Entry made			adjusting entry
														Date	Particulars	Amount $	Amount $	Date	Particulars	Amount $	Amount $	Date	Particulars	Amount $	Amount $
														01.01.19	Cash A/c	6000		01.01.19	Cash A/c	6000
Depreciation to be charged on 5 year basis on all equipments. No salvage value															To Equipment 1 sold		6000		To Equipment 1 sold		6000
		Depreciation													( being equipment 1 sold)				( being equipment 1 sold)
	date of purchase	Amount $	2015	2016	2017	2018	2019	2020	2021	Total depreciation	Net value	Net gain/(Loss)		01.07.19	Equipment 5	80000		01.07.19	Equipment 5	66000		01.07.19	Equipment 5	14000
equipment 1	01.01.15	50000	10000	10000	10000	10000				40000	10000	-4000			To equipment 2		14000		To Cash		66000		To equipment 2		14000
Sales of equipment 1 on 01.01.2019							6000			6000					To Cash		66000
														( being equipment 5 purchased on exchange of no 2)
equipment 2	01.07.15	60000	6000	12000	12000	12000	6000			48000	12000	2000		01.01.2020	Cash A/c	500		01.01.2020	cash	12500		01.01.2020	Insurance co	12000
trade of equipment 2 on 01.07.2019 for No 5							14000			14000					Insurance co	12000			To Miscellaneous Income		500		Miscellaneous Income	500
equipment 3	01.01.16	55000		11000	11000	11000	11000	5500		49500	5500	7000			To Equipment 3		12500		To equipment 3		12000		To cash A/c		12000
Cash received								500		12500				(being cash and insurance money received from equipment 3)									To equipment 3		500
Insurance money								12000														01.12.2019	Depreciation a/c	2400
equipment 4	01.07.17	70000			7000	14000	14000	14000	14000	63000	7000												to Retained Earning		2400
equipment 5	01.07.19	80000					8000	16000	16000	40000	40000											( being depreciation charged )
equipment 6	01.07.2021	92000							9200	9200	82800											01.12.2020	Depreciation a/c	2800
																							to Retained Earning		13200
																						( being depreciation charged )
Total depreciation			16000	33000	40000	47000	45000	35500	39200													01.12.2021	Depreciation a/c	3800
entries made by bookkeeper						47000	42600	32700	35400														to Retained Earning		3800
Difference						0	2400	2800	3800	( less depreciation has been charged)												( being depreciation charged )