Question

Capital expenditure and depreciation

Instructions

Willow Creek Company purchased and installed carpet in its new general offices on April 30 for a total cost of $27,504. The carpet is estimated to have a 12-year useful life and no residual value.

A.	Prepare the journal entry necessary for recording the purchase of the new carpet. Refer to the Chart of Accounts for exact wording of account titles.
B.	Record the December 31 adjusting entry for the partial-year depreciation expense for the carpet, assuming that Willow Creek Company uses the straight-line method. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS
Willow Creek Company
General Ledger
ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 114 Interest Receivable 115 Notes Receivable 116 Merchandise Inventory 117 Supplies 119 Prepaid Insurance 120 Land 123 Carpet 124 Accumulated Depreciation-Carpet 125 Equipment 126 Accumulated Depreciation-Equipment 130 Mineral Rights 131 Accumulated Depletion 132 Goodwill 133 Patents LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Owner's Capital 311 Owner's Drawing	REVENUE 410 Sales 610 Interest Revenue 620 Gain on Sale of Carpet 621 Gain on Sale of Equipment EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Carpet 523 Delivery Expense 524 Repairs and Maintenance Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Equipment 533 Depletion Expense 534 Amortization Expense-Patents 535 Insurance Expense 536 Supplies Expense 539 Miscellaneous Expense 710 Interest Expense 720 Loss on Sale of Carpet 721 Loss on Sale of Equipment

Journal

A. Prepare the journal entry necessary for recording the purchase of the new carpet. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

B. Record the December 31 adjusting entry for the partial-year depreciation expense for the carpet, assuming that Willow Creek Company uses the straight-line method. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 2

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3

Answer 1

Above question is about recording of journal entry for purchase of carpet and recognition of depreciation for carpet (adjusting entry). Refer below image for detailed solution.

Solution: Journal entry Date Descri prion post Ref- Debit Credit April 30 carpet Ale To Cash Alc DY { २१J०१ २+o५ (Being purchase of caupet for cash). Journal entry (Adjosting journal entry): Date Deseviption Debit credit post. Ret. De cem ber Depreciation expense Ale Dr - cax pet To Accomulated depreciaton - (arpet $ 1528 $ 1528 ( Being Depreiation expense recognized) woYking: calcolation of Depreciation (carpet): Cost of an A Sser - Desidual value Depreciaton %3D * No- of perieds life of an Asset $ 27504- $0 8(7onths) %3D 12 12 years $ 27504 %3D Depreciation = $1528