Question

19 ACCOUNTING FOR DEPRECIABLE ASSETS Instructions: Using the information provided below: 1. Calculate the annual depreciation for the depreciable assets in 2017. 2. Prepare the journal entries (using correct dates and explanations that are necessary to record the following: the purchase of the assets bought in 2017 the depreciation for each of the depreciable assets for the year ended Dec. 31, 2017 the potential sale of the truck on December 31, 2020 using the information provided 3. Enter the post references in the journal for journal entries pepared in Step 2. (note: only include post references for the entries actually posted). 4. Complete the financial statements for the year ended December 31, 2017 (NOTE: current portion of note payable is $52,800) 5. Answer questions a-d. I 2016 and 2017, Fish & Bait Company had in the following transactions for fixed assets. In 2016 and 2011 Depreciation Transaction Method Life Purchase Date Cost N/A Purchased land 1/1/2016 N/A $ 124 225 6/30/2016 Purchased machinery Units-of-prod. 24,000 hours $ 132.000 DD balance 5 years $ 65,000 10/1/2017 Purchased store equip. Straight line 8 years $ 80,000 Salvage Value N/A 12,000 6,000 8,000 1/5/2017 Purchased truck Additional information: • The company paid $5,000 cash for the truck and any paid $5,000 cash for the truck and signed a loan for the remainder of the purchase. . The company paid cash for the store equipment. e machinery was actually used for the following number of hours: 2016 2,900 hours 2017 4,100 hours -RDCCIATION

Answer 1

1. Calculation of annual depreciation for depreciable assets in 2017

a) Machinery

Depreciation (Units of Prod) = (Cost - Salvage Value) * Machinery hours in 2017 / Life of Machinery in hours

= ($ 132,000 - $ 12,000) * 4,100 Hours / 24,000 Hours

= $ 20,500

b) Truck

Depreciation (DD Balance) = Net Book Value of Asset * ( 2*Depreciation Rate)

= $ 65,000 * [2 * (1/useful life * 100) * 360 Days/365 Days

= $ 65,000 * [2* (1/5 * 100) * 360/365

= $ 65,000 * 40% * 360/365

= $ 25,643.84

c) Store Equipment

Depreciation ( Straight Line) = (Cost - Salvage Value) / Useful Life * No of months used / No of months in year

= ($ 80,000 - $ 8,000) / 8 Years * 3 Months/12 Months

= $ 2,250

2. Journal entries for the year 2017

Debit ($) 65,000 Date General Journal 05-Jan-17 Truck 05-Jan-171 Cash 05-Jan-17 Note Payable Credit (s) Narration Truck purchased 5.000 Truckmurchased 60,000 Truck purchased 80,000 01-Oct-17 Store Equipment 01-Oct-17 Cash Store Equipments purchased 80,000 Store Equipments purchased 20,500 25,644 2,250 31-Dec-17 Depreciation Expense - Machinery 31-Dec-17 Depreciation Expense - Truck 31-Dec-17 Depreciation Expense - Store Equipment 31-Dec-17 Accumulated Depreciation - Machinery 31-Dec-17 Accumulated Depreciation - Truck 31-Dec-17 Accumulated Depreciation - Store Equipment Deprerciation for the year ended 31 Dec 2017 Deprerciation for the year ended 31 Dec 2017 Deprerciation for the year ended 31 Dec 2017 20,500 Deprerciation for the year ended 31 Dec 2017 25,644 Deprerciation for the year ended 31 Dec 2017 2,250 Deprerciation for the year ended 31 Dec 2017 31-Dec-20 Accumulated Depreciation - Store Equipment 31-Dec-20 Cash 31-Dec-20 Loss on sale of Asset 31-Dec-20 Truck 56.499 6,000 2,501 Potential sale of Truck as at 31 Dec 2020 Potential sale of Truck as at 31 Dec 2020 Potential sale of Truck as at 31 Dec 2020 65,000 Potential sale of Truck as at 31 Dec 2020

Computation of Loss on sale of Truck in 2020 = Cost of the Asset - Accumulated Depreciation till 2020 - Sale Value

= $ 8,501 (Computed Below) - $ 6,000 (salvage value)

= $ 2,501

Depreciation Closing Formula for Year Op Net Block for the year Net Block calculation 2017 65,000 25,644 39,356 Op Net Block * 40% 2018 39,356 15,742 23,614 Op Net Block * 40% 2019 23,614 9,445 14,168 Op Net Block * 40% 2020 14,168 5,667 8,501 Op Net Block * 40%

3. Not understood the exact requirement

4. Financial Statements - The information is not complete to prepare the Financial Statements