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 $174,000 cash to purchase a small warehouse building near the airport. The building has an estimated life of 20 years and a residual value of $3,400. July 1 Paid $39,000 cash to purchase a delivery van. The van has an estimated useful life of five years and a residual value of $7,800. October 2 Paid $400 cash to paint a small office in the warehouse building. October 13 Paid $200 cash to get the oil changed in the delivery van. 1,500 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 $139,000 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 franchise right was not impaired in value. Required:

Answer 1

Date	General Journal	Dr.	Cr.
Dec 31, 2018	Depreciation expense	11,650
	Amortization expense	1,525
	Accumulated depreciation - Buildings		8,530
	Accumulated depreciation - Equipment		3,120
	Accumulated amortization		1,525

*Recorded Depreciation of Building and Equipment and amortization of franchise right.

Depreciation of Building – (174000-3400)/20 = 8530/-

Depreciation of Van – ((39000-7800)/5)*12/6 = 3120/-

Amortization of franchise right – (91500/5)/12/1 = 1,525/-

Date	General Journal	Dr.	Cr.
Dec 31, 2018	Depreciation expense	11,650
	Amortization expense	1,525
	Accumulated depreciation - Buildings		8,530
	Accumulated depreciation - Equipment		3,120
	Accumulated amortization		1,525

*Sale of Building on loss and depreciation recorded in the books

Accumulated depreciation – Buildings - 8,530 + 4265 = 12795/-

Date	General Journal	Dr.	Cr.
Dec 31, 2019	Depreciation expense	6,240
	Amortization expense	18,300
	Accumulated depreciation - Equipment		6,240
	Accumulated amortization		18,300

*Depreciation and amortization recorded for the year 2019.