Question

1.

Equipment was acquired at the beginning of the year at a cost of $77,100. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,860.

a. What was the depreciation expense for the first year?
$

b. Assuming the equipment was sold at the end of the second year for $58,300, determine the gain or loss on sale of the equipment.
$   

c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank or enter "0".

2.

A business issued a 30-day, 7% note for $67,200 to a creditor on account. The company uses a 360-day year for interest calculations.

	Required:
	Journalize the entries to record (a) the issuance of the note on April 30 and (b) the payment of the note at maturity, including interest on May 30. Refer to the Chart of Accounts for exact wording of account titles.

Chart Of Accounts

CHART OF ACCOUNTS
General Ledger
ASSETS 110 Cash 111 Accounts Receivable 112 Interest Receivable 113 Notes Receivable 115 Inventory 116 Supplies 118 Prepaid Insurance 120 Land 123 Building 124 Accumulated Depreciation-Building 125 Office Equipment 126 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 213 Interest Payable 214 Notes Payable 215 Salaries Payable 216 Social Security Tax Payable 217 Medicare Tax Payable 218 Employees Federal Income Tax Payable 219 Employees State Income Tax Payable 220 Medical Insurance Payable 221 Retirement Savings Deductions Payable 222 Union Dues Payable 224 Federal Unemployment Tax Payable 225 State Unemployment Tax Payable 226 Vacation Pay Payable 228 Product Warranty Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Salaries Expense 525 Delivery Expense 526 Repairs Expense 531 Rent Expense 533 Insurance Expense 534 Supplies Expense 535 Payroll Tax Expense 536 Vacation Pay Expense 538 Cash Short and Over 539 Product Warranty Expense 541 Depreciation Expense-Building 542 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense

General Journal

Journalize the entries to record (a) the issuance of the note on April 30 and (b) the payment of the note at maturity, including interest on May 30. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

Answer 1

Equipment Cost Residual value Useful life 77,100 $ 7,860 6 years Depreciation under straight line method = (Cost - Residual value) / Useful life =($ 77,100 - $ 7,860)/6 years 11,540 Depreciation expense for the first year 11,540 77,100 Equipment Cost Accumulated depreciation at the end of Less: second year Book value at the end of second year (23,080) ($ 11,540*2 years) 54,020 B Sale value 58,300 A Gain /(Loss) 4.280 A-B Credit Accounts tittle Cash Accumulated depreciation Equipment Gain on sale of equipment Debit $ 58,300 $ 23,080 $ 77,100 4.280 | $

Credit Date Accounts tittle 30-Apr Accounts payable Notes payable Debit $ 67,200 $ 67,200 Credit Date Accounts tittle 30-May Notes payable Interest expense Cash Debit 67,200 $ 392 =($ 67,200 * 7%*30/360) $ 67.592 Accounting equation Post Ref Credit Debit $ 67,200 $ Date Description 30-Apr Accounts payable 30-Apr Notes payable 30-May Notes payable 30-May Interest expense 30-May Cash Assets Liabilities Equity $(67,200) 67,200 $ 67,200 $(67,200) $ (392) 67,592 $(67,592) $ 67,200 392 $