These are all on the same question.
Solution
Atiase Pharmaceuticals
Assets |
= |
Liabilities |
+ |
Shareholders' Equity |
|||
Equipment |
$500 |
= |
0 |
+ |
Equity |
$500 |
|
Transaction |
Account Titles and Explanation |
Debit |
Credit |
1 |
Cash |
$950 |
|
Depreciation Expense |
$650 |
||
Accumulated Depreciation - Equipment |
$5,850 |
||
Equipment |
$7,000 |
||
Gain on Sale of Equipment |
$450 |
||
(To record sale of equipment and the resulting gain) |
|||
Bridge City Consulting
Transaction |
General Journal |
Debit |
Credit |
1 |
Building |
$50,000 |
|
Land |
$75,000 |
||
Cash |
$125,000 |
||
(To record purchase of land and building; land = 60% x 125,000 = 75,000; building = 125,000 x 40% = 50,000) |
|||
2 |
Repairs and Maintenance |
$10,000 |
|
Cash |
$10,000 |
||
(To record repairs) |
3 |
Straight line depreciation |
$4,700 |
4a |
Land |
$75,000 |
4b |
Building |
$40,600 |
Computations:
Book value of land and building at the end of second year:
Land –
Book value would equal cost, as the land is a non-depreciable asset.
Hence, book value at end of year = $75,000
Building –
Book value at end of year 1 –
Depreciation expense = depreciable base x straight line depreciation rate
Depreciable base = cost – residual value
Residual value = $3,000
Cost = $50,000
Useful life = 10 years
Depreciation expense = 50,000 – 3,000 x 1/10 = $4,700
Book value at end of year 1 = 50,000 – 4,700 = $45,300
Book value at end of year 2 –
Depreciation expense = $4,700
(Computed above, the annual depreciation expense under the straight line method would remain constant throughout the useful life of the asset)
Accumulated depreciation at end of second year = 4,700 x 2 = $9,400
Book value = cost – accumulated depreciation
= 50,000 – 9,400 = $40,600
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