The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. Year 1 Jan. 4. Purchased a used delivery truck for $28,000, paying cash. Nov. 2. Paid garage $675 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck. Year 2 Jan. 6. Purchased a new truck for $48,000, paying cash. Apr. 1. Sold the used truck for $15,000. (Record depreciation to date in Year 2 for the truck.) June 11. Paid garage $450 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. Year 3 July 1. Purchased a new truck for $54,000, paying cash. Oct. 2. Sold the truck purchased January 6, Year 2, for $16,750. (Record depreciation to date for Year 3 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $12,000 and an estimated useful life of eight years. Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles.
The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. Year 1 Jan. 4. Purchased a used delivery truck for $28,000, paying cash. Nov. 2. Paid garage $675 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck. Year 2 Jan. 6. Purchased a new truck for $48,000, paying cash. Apr. 1. Sold the used truck for $15,000. (Record depreciation to date in Year 2 for the truck.) June 11. Paid garage $450 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. Year 3 July 1. Purchased a new truck for $54,000, paying cash. Oct. 2. Sold the truck purchased January 6, Year 2, for $16,750. (Record depreciation to date for Year 3 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $12,000 and an estimated useful life of eight years. Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles.
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter15: Financial Statements And Year-end Accounting For A Merchandising Business
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.
| Year 1 | |
| Jan. 4. | Purchased a used delivery truck for $28,000, paying cash. |
| Nov. 2. | Paid garage $675 for miscellaneous repairs to the truck. |
| Dec. 31. | Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck. |
| Year 2 | |
| Jan. 6. | Purchased a new truck for $48,000, paying cash. |
| Apr. 1. | Sold the used truck for $15,000. (Record depreciation to date in Year 2 for the truck.) |
| June 11. | Paid garage $450 for miscellaneous repairs to the truck. |
| Dec. 31. | Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. |
| Year 3 | |
| July 1. | Purchased a new truck for $54,000, paying cash. |
| Oct. 2. | Sold the truck purchased January 6, Year 2, for $16,750. (Record depreciation to date for Year 3 for the truck.) |
| Dec. 31. | Recorded depreciation on the remaining truck. It has an estimated residual value of $12,000 and an estimated useful life of eight years. |
Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTSLegacy Furniture Co.General Ledger
| ASSETS | |
| 110 | Cash |
| 111 | Petty Cash |
| 112 | Accounts Receivable |
| 114 | Interest Receivable |
| 115 | Notes Receivable |
| 116 | Merchandise Inventory |
| 117 | Supplies |
| 119 | Prepaid Insurance |
| 120 | Land |
| 123 | Delivery Truck |
| 124 | |
| 125 | Equipment |
| 126 | Accumulated Depreciation-Equipment |
| 130 | Mineral Rights |
| 131 | Accumulated Depletion |
| 132 | |
| 133 | Patents |
| LIABILITIES | |
| 210 | Accounts Payable |
| 211 | Salaries Payable |
| 213 | Sales Tax Payable |
| 214 | Interest Payable |
| 215 | Notes Payable |
| EQUITY | |
| 310 | Common Stock |
| 311 | Retained Earnings |
| 312 | Dividends |
| 313 | Income Summary |
| REVENUE | |
| 410 | Sales |
| 610 | Interest Revenue |
| 620 | Gain on Sale of Delivery Truck |
| 621 | Gain on Sale of Equipment |
| EXPENSES | |
| 510 | Cost of Merchandise Sold |
| 520 | Salaries Expense |
| 521 | Advertising Expense |
| 522 | Depreciation Expense-Delivery Truck |
| 523 | Delivery Expense |
| 525 | Truck Repair Expense |
| 529 | Selling Expenses |
| 531 | Rent Expense |
| 532 | Depreciation Expense-Equipment |
| 533 | Depletion Expense |
| 534 | Amortization Expense-Patents |
| 535 | Insurance Expense |
| 536 | Supplies Expense |
| 539 | Miscellaneous Expense |
| 710 | Interest Expense |
| 720 | Loss on Sale of Delivery Truck |
| 721 | Loss on Sale of Equipment |
Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to access pages 2 and 3 of the journal.
Journalize the Year 1 transactions and adjusting entries on Page 1.
Transcribed Image Text:PAGE 1
JOURNAL
ACCOUNTING EQUATION
DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
ASSETS
LIABILITIES
EQUITY
1
Adjusting Entries
Journalize the Year 2 transactions and adjusting entries on Page 2.
PAGE 2
JOURNAL
ACCOUNTING EQJATION
DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
ASSETS
LIABILITIES
EQUITY
Transcribed Image Text:Adjusting Entries
11
11
13
Journalize the Year 3 transactions and adjusting entries on Page 3.
PAGE 1
JOURNAL
ACCOUNTING EQUATION
DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
ASSETS
LIABILITIES
EQUITY
1.
Adjusting Entries
11
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