Question

Gloria Roper Associates surveys American eating habits. The company's accounts include Land, Buildings, Office Equipment, and Communication Equipment, with a separate Accumulated Depreciation account for each depreciable asset During 2018, Gloria Roper Associates completed the following transactions: (Click the loon to view the transactions.) Record the transactions in the joumal of Gloria Roper Associates. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Jan. 1: Purchased office equipment, $119,000. Paid $78,000 cash and financed the remainder with a note payable. (Record a single compound journal entry) Date Accounts and Explanation Debit Credit Jan. 1 Choose from any list or enter any number in the input fields and then click Check Answer

Answer 1

Date	Accounts and explanation	Debit	Credit	Calculation
1-Jan	Office Equipment	119,000
	Cash		78,000
	Notes payable		41,000	=119000-78000
	(Being office equipment purchased; partly in cash and partly financed)
1-Apr	Land	277,500		As below
	Communication equipment	92,500		As below
	Cash		370,000
1-Sep	Cash	410,000
	Depreciation on building	7,750		As below
	Accumulated depreciation	275,000
	Building		540,000
	Profit on sale of building		152,750	As below
31-Dec	Depreciation - Communication equipment	13,875		=(92500/5) X 9 /12 (For 9 months - Apr to Dec)
	Depreciation - Office equipment	47,600		As below
	Accumulated depreciation		61,475

Calculation for Apr 1 entry: Lump sum purchase

Cost of assets in lumpsum purchase is to be distributed in the ratio of their fair values as below:

Asset	Fair value	Ratio	Book value	Calculation of BV
Land	291,375	0.75	277,500	370000 x 0.75
Communication equipment	97,125	0.25	92,500	370000 x 0.25
TOTAL	388,500		370,000

Calculation for Sep 1 entry:

Depreciation calculation:

Annual depreciation = (Cost - Residual value)/ Life

= (540000-75000)/40

=11625

Depreciation till Sep 1 (8 months) = 11625 X 8 / 12 = 7750

Profit on sale of building

= Sales Price - (Cost - Accumulated Depreciation - Current period depreciation)

= 410000 - (540000 - 275000 - 7750)

= 152750

Calculation of Dec 31 entry

Calculation of office equipment by double declining method:

Calculate normal depreciation rate: 1/ Useful life X 100 = 1/5 X 100 = 20%

Double declining balance formula = 2 X Cost of asset X Depreciation Rate

Year 1 depreciation = 2 X 119000 X 20%

= 47600