Question

Recording Entries Using Composite Depreciation Method California Utilities owns a power plant that consists of the following assets, all acquired on January 1, 2020. Estimated Estimated Residual Life Cost Value (Years) Building $120,000 $4,000 30 Machinery 38,000 10 Other equipment 20,000 2,000 6 0 a. Compute the total straight-line depreciation for 2020 on all items combined. Total depreciation expense for 2020 $ 1,335,000 * b. Compute the composite depreciation rate (based on cost) and the composite life of the plant. Note: Round both amounts to two decimals. Composite depreciation rate 0.059 Composite life 16.12 x Dr. Cr. 80,000 X C. Provide the entry to record 2020 composite depreciation. Date Account Name Dec 31, 2020 Depreciation Expense Accumulated Depreciation 80,000 x d. Assume that all of the Other equipment was sold in 2023 for $2,400 cash. Prepare the entry for the sale of that equipment. Date Account Name Cr. Dec 31, 2023 Cash Accumulated Depreciation Loss on Impairment Dr. 18,000 X 0 0 x 0 07 OX Check

Answer 1

Answer: (a.) under straight line method depreciation Can be calculated by Cost Residual value useful life . so, Total Straight line depreciation for 2020 are as follows: Building 3867 ( Machinery 120000 - how 30 38000 39000 10 other Equipment 20006-2000 3000 Total Straight line defereciation 10667

(b). Composite depreciation Rate of plant Total depreciation enpense x loo Total cost of all asset = 11 $ 10,667 $ 178,000 = 15.99% Composite life of the plant Total Cost of all asset c Total depreciation expenst $ 178.000 $10,667 16.69 years

(c). Journal ertrag to record composito depreciation enpense for 2020 are as follows: Dec 31, 2020 Depreciation expense ----- DY 10667 To Accumulated Depreciation 10667 (Being depreciation expense of whole plant recorded). (d). Journal entry for the sale of other equipments are as follows: Dec 31, 2023 Cash Ale Dr 2400 20000 Accumulated depreciation ---DX 12000 Loss on sale of Equipment an Dr 5600 To other equipment. (Being Other equipment Soll) Note - Accumulated depreciation $3000.x 4 years = $12erro

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