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 $101,000 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 $47,000 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 $500 cash for minor repairs to the pickup truck's upholstery. July 1 Paid $14,000 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 $40,000 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.) View transaction list Journal entry worksheet 2 3 4 5 6 7 8 ..... 12 Record the purchase of storage shed components for $101,000. Note: Enter debits before credits. General Journal Debit Credit Date January 02, 2018 Record entry Clear entry View general journal

Answer 1

Page 1 DATE IT Credit: Date Debit 2 Jan stonage shed Afc $1,00,ooo. 2018. To cash $100,000 rules of accounting Explanation : Refer to the golden Debit what comes in Credit what goes out 13 Jan 2018 Enection expenses are added to the cost of a capital expenditure the asset . and then Going as per the same rule above, or Storage shed ale То САД $6000 $6000 1 Apr 2018 Pick-up truck afc Dr To cash ac $47,000 $ 47,000 As the Repairs mentioned in the question do not improve the machine's productivity, are considered as Revenue Expenditure Cie.. cannot be capitalised ladded to the cost of the asset Hence the entry shall be . 13 may 2018 Repain to machinery alcor To cash $500 $500

Page - 2 DATE Tuly 1 Accounting for patent is the same as for any other asset o Patents afc or ood To cash al $ 14,000 - $1,4000 Depreciation and amortisation expense on truck, storage shed and patent for the the pick-up year. Computation of deprecation Truck Storage shed Jan - Dec Dep.on cost of the Aper 2018 - Dee 2018 9 months Cost of the asset = $47,000 aceful life = years Residnal nahe = $7000 Purchase cost + Erection cost o Residual value cost of the asset $1,01,000 $ 6000 $ 9000 $ 98,000 Est useful life = loyears Dep for the = $47,000 $7,000 Syears Depreciation = cost of the asset Est. Useful life 2 $ 98,000 = $9500 10 years per year Dep neciation for 9 months $8000 x 9 months 12 months 3 соро Amortisation July - Dee Syears of Patent :- - 6 months = Right to use = $2800 per year Amortization 2 $14,000 classmate PAGE

Page - 3 su PATEL Joernal Entry $15,800 Depreciation Ale or TO stonage shed at По Ти си с $9800 $6000 eBeing dep changed to the name of the asset as asset ale to reflect the true per the matching concept) $1400 $2800 Amortisation TO expense ale or Patent alc $1400 (6 monte (same as abone) at alternatively, it can be showen as a the balance sheet in credit balance asset in. contra with 2019 Recording Depreciation upto the year of sale - June 30 Depreciation afc or $4000 A TO Tunch ale (Depreciation for 6 months or a $8000 x 12 = $4000 - $ 4090 ) Sale Entry Cash ale or $40,000 Profit/ loss ale or $47,200 To truck ale - 87,200 Being cale of asset $47, 900) necorded with a loss of lacetate

DATE TOID Dec 31 Depreciation Shall remain of storage shed. the same as 2018 Depreciation Ale or To so nage thed $9800 - $9800 Patent was impained book nahre and nonote - off its nemaining Impairment loss afc ay To patent at $12,600 - $12,600 ontty value of the patent 2 $14,000 & 1400 2 $12,600 0 Record Patent Amortisation expense for full year. Alc or $ 2800 Amortisation expense To patent All $2800 O Reversal of Accumalated Patents amortisation $4200 Amortisation enpense ale or To Propith loss afe Impairment loss occurred on (Entire book vane written Patent donen) $9800 Impairment loss dlc or To patent $9800 флает Pelal or To Impairment loss PAGE