Question

wiater company operates a small manufacturing facility. on january 1 2018, an asset account for the company showed the following balances:

Equipment 344,000

accumulated depreciation (beginning of year) 212,000

during the fiest week of jan 2018 the following expenditures were incurred repairs and maintenence:

routine repairs/maintenece 3550

major overhaul for improved effeciency 41,000

The equipment is being depreciated on a straight line basis over an estimatef life of 15 years with a 26000 estimated residual value. the annual accounting period is dec 31.

1.prepare the adjusting journal entry that would have been made at the end of 2017 for depreciation on thr manufacturing equipment.

2. starting at yhe beginning of 2018, ehat is the remaining estimated life?

3. prepare the journal entries to recors the two expenditures for repairs and maintenance during 2018.

Answer 1

ANSWER:

(1).

Date	Account title and explanation	Debit	Credit
2017	Depreciation expense (344,000-26000) / 15	$21,200
	Accumulated depreciation-Equipment		$21,200

(2).

Completed estimated life = Accumulated depreciation / Depreciation expense per year

=212,000 / 21,200

=10 years

Running estimated life = Total estimated life-Completed estimated life

  =15 years-10 years

=5 years

Therefore, the remaining estimated life is 5 years

(3).

Date	Account title and explanation	Debit	Credit
2018	Repais and maintenance expense	$3550
			$3550
2018	Equipment	$41,000
	Cash		$41,000

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