Question

The following transactions and adjusting entries were completed by Gravure Graphics International, a paper-packaging company. The company uses straight-line depreciation for trucks and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents. April January 2, 2016 Paid $96,600 cash to purchase storage shed components. January 3, 2016 Paid $5,400 cash to have the storage shed erected; storage shed has an estimated life of ten years and a residual value of $11,000. 1, 2016 Paid $42,400 cash to purchase a pickup truck for use in the business; truck has an estimated useful life of five years and a residual value of $8,400. May 13, 2016 Paid $290 cash for repairs to the pickup truck. July 1, 2016 Paid $20,400 cash to purchase patent rights a new paper bag manufacturing process; patent is estimated to have a remaining useful life of five years. December 31, 2016 Recorded depreciation and amortization on the pickup truck, storage shed, and patent. June 30, 2017 Sold the pickup truck for $36,800 cash. (Record the depreciation on the truck prior to recording its disposal.) December 31, 2017 Recorded depreciation on the storage shed; 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.) View transaction list Journal entry worksheet < 1 2 3 4 5 7 8 9 > Paid $96,600 cash to purchase storage shed components. Note: Enter debits before credits. Date General Journal Debit Credit Jan 02, 2016

Answer 1

Solution:

Journal Entries

Date	General journal	Debit($)	Credit($)
Jan 02, 216	Buildings a/c Dr	96,600
	To Cash a/c		96,600
	(Being record the purchase of storage shed components)
Jan 03, 2016	Building a/c Dr	5,400
	To cash a/c		5,400
	(Being record the erection of storage shed)
April 01, 2016	Truck a/c Dr	42,400
	To cash a/c		42,400
	(Being purchase of truck )
May 13, 2016	Repairs and maintenace expenses a/c Dr	290
	To Cash a/c		290
	(Being paid for repairs to the pickup truck)
July 01, 2016	Patent a/c Dr	20,400
	To cash a/c		20,400
	(Being paid to purchase of patent)
December 31, 2016	Depreciation expense a/c Dr	25,500
	Amortization expense a/c Dr	2,040
	To Accumulated deprecition - Building a/c (96600+5400)/10 x 2		20,400
	To Accumulated depreciation - Truck a/c (42400-8400)/5 = 6800 x 9/12		5,100
	To patent a/c (20400/5) x (6/12)		2,040
	(Being record depreciaion and amortization)
June 30, 2017	Depreciation expense a/c Dr	3,400
	To accumulated depreciation - truck a/c		3,400
	(Being record the depreciation on truck from jan 2017to june 2017) (42400-8400)/5 = 6800 x6/12
June 30,2017	Cash a/c Dr	36,800
	Accumulated depreciation - truck a/c Dr (3400+5100)	8,500
	To truck a/c		42,400
	To Gain on disposal a/c		2,900
	(Being sold the truck)
December 31, 2017	Depreciation expense a/c Dr (102000-20400)/10 x 2	16,320
	Impairement loss a/c Dr (20400-2040)	18,360
	To accumulated depreciation - building a/c		16,320
	To patent a/c		18,360
	(Being record of depreciation of storage shed and patent was impaired written off)