Question

The following transactions and adjusting entries were completed by a paper-packaging company called Gravure Graphics International during 2018 and 2019. The company uses straight-line depreciation for trucks and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents.

2018
January		2		Paid $96,000 cash to purchase storage shed components.
January		3		Paid $6,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $9,000.
April		1		Paid $42,000 cash to purchase a pickup truck for use in the business. The truck has an estimated useful life of five years and a residual value of $7,000.
May		13		Paid $600 cash for minor repairs to the pickup truck's upholstery.
July		1		Paid $19,000 cash to purchase patent rights on a new paper bag manufacturing process. The patent is estimated to have a remaining useful life of five years.
December		31		Recorded depreciation and amortization on the pickup truck, storage shed, and patent.
2019
June		30		Sold the pickup truck for $36,000 cash. (Record the depreciation on the truck prior to recording its disposal.)
December		31		Recorded depreciation on the storage shed. Also determined that the patent was impaired and wrote off its remaining book value (i.e., wrote down the book value to zero).

Required:

Prepare the journal entries required on each of the above dates. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Answer 1

Journal Entries:

Date	Accounts Titles and Explanations	Debit	Credit
Jan. 2, 2018	Buildings	$96,000
	Cash		$96,000
	(To record the purchase of storage shed by cash)
Jan. 3, 2018	Buildings	$6,000
	Cash		$6,000
	(To record the storage shed erected by cash)
Apr. 1, 2018	Truck	$42,000
	Cash		$42,000
	(To record the purchase of truck by cash)
May. 13, 2018	Repair Expenses	$600
	Cash		$600
	(To record the payment of cash for minor repairs)
Jul. 1, 2018	Patents	$19,000
	Cash		$19,000
	(To record the purchase of patents by cash)
Dec. 31, 2018	Depreciation Expense - Buildings [($96,000 + $6,000)/10 years*2]	$20,400
	Accumulated Depreciation - Buildings		$20,400
	(To record depreciation on buildings on double declining balance method)
Dec. 31, 2018	Depreciation Expense - Trucks [($42,000 - $7,000)/5 years]	$7,000
	Accumulated Depreciation - Trucks		$7,000
	(To record depreciation on trucks on straight-line method)
Dec. 31, 2018	Amortization Expense - Patents ($19,000/5 years)	$3,800
	Accumulated Amortization - Patents		$3,800
	(To record the amortization on patents on straight-line method)
Jun. 30, 2019	Cash	$36,000
	Accumulated Depreciation - Truck	$7,000
	Depreciation Expense - Trucks [($42,000 - $7,000)/5 years*6/12 months]	$3,500
	Truck		$42,000
	Gain on sale of Truck ($42,000 - $36,000 - $7,000 - $3,500)		$4,500
	(To record the journal enty for the sale of truck)
Dec. 31, 2019	Depreciation Expense - Buildings [$96,000 - $20,400 = $75,600)/10 years*2]	$15,120
	Accumulated Depreciation - Buildings		$15,120
	(To record depreciation on buildings on double declining balance for 6 months)
Dec. 31, 2019	Accumulated Amortization - Patents	$11,400
	Patents ($19,000 - $3,800 - $3,800)		$11,400
	(To record the writt off its patents)