Question

Brett Heart Co. maintains its accounts on the basis of a fiscal year ending June 30, 2018. On June 30, 2018, The Equipment account shows a debit balance of $224,000 which consists of a machine that was purchased on July 1, 2015 for $200,000 and a truck was purchased on 1/1/2018 (details below). The machine has a salvage value of 20,000 and the truck has a salvage value of $7,300. Both assets are being depreciated on a straight-line basis over 10 years. It is company policy to take a full year's depreciation in the first year of use for all assets.

The Accumulated Depreciation account shows a credit balance of $75,000.

As the auditor, you are tasked with verifying the Equipment account balance and the corresponding balance in Accumulated Depreciation.

You find an invoice for the truck that shows the following:

List price $35,000

+ 5% sales tax 3,000

- Dealer discount ( 9,000)

- Cash down payment   (5,000)

Net due $24,000

Required:

1. Calculate the correct price for the truck.

2. Calculate the correct depreciation expense for the truck for year 1.

3. Calculate the correct accumulated depreciation amount for the machine.

4. Use the information above to prepare a journal entry to adjust the Equipment and Accumulated Depreciation accounts. After you are finished, you should have four accounts with the correct balances: 1) Equipment, 2) Trucks, 3) Accumulated Depreciation - Equipment and 4) Accumulated Depreciation - Trucks.

Note: Any overages or underages in your journal entry should be charged to the appropriate account

Answer 1

Sduhon ist Prire los Deatar duse = 3alo erice Add Sales to (Sh) = Co ect pare 26,000 13G0 tuck-2,3GD $7300 Sal voje ufe 10ys reI ru cK Correct Depreua tion ot truck (Cot Crice ufe (23,360-,30010 Soturye val 2000 CS Scanned with

200000 price machneng Cost Saluga 20 value Lfe rOyes Depreciation P.a Date of 200000-20,00oio$1000 0al012015 Rrchaze opreciaton o6 3018 Accumulakd CS Sanned witn C mScanner

Equipment cost 2 2u000 200 o00 2a300 : 3227,300 As pea Actual 222300 224000 -$3,300 Accumulated daprecia tron 5000 S6,000 As book per Acual SuO00 2000 $1१०০০. 3,300 AIC Journ al i Truok oton able eng trek unluo undesteted, nouo 3,300 To nectfe (24000-7300 DeprecatemPor tre recurdod $1,670 Actuad 2000 dope cation B330 I630 2000 Depreuohin Erponser Acc Dep- Tru k $330 Azza $330 CS Pcanned with CamScanner

Acc. Dep re corded 19000 Dop- rucN not recordd 330 Machina 19,330 xcers Acc AJd Acc Dep Excos Total Machiner Erpencer 19, 330 Acc. Dep 9,330 Depredation CS Scanhed with Carmscanner

Crreet Balonce Equip ment 223,300 327300 Truck 22 A cc Dep F quipment 20 060 56O00 3 Acc- Dep 2000 Truc= esScanned with CamScanner