Question

Casting Crown Construction entered into the following transactions during a recent year:

January		2		Purchased a bulldozer for $220,000 by paying $21,000 cash and signing a $199,000 note.
January		3		Replaced the steel tracks on the bulldozer at a cost of $22,000, purchased on account.
January		30		Wrote a cheque for the amount owed on account for the work completed on January 3.
February		1		Replaced the seat on the bulldozer and wrote a cheque for the full $1,100 cost.
March		1		Paid $8,400 cash for the rights to use computer software for a two-year period.

Required:
1-a. Analyze the accounting equation effects. (Enter any decreases to accounts with a minus sign.)

1-b. Prepare the journal entries for each of the transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. For the tangible and intangible assets acquired in the preceding transactions, determine the amount of depreciation and amortization that Casting Crown Construction should report for the quarter that ended March 31. The equipment is depreciated using the double-declining-balance method with a useful life of five years and $44,000 residual value.

3. Prepare a journal entry to record the depreciation and amortization calculated in requirement 2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

4. Not available in Connect.

Answer 1

1 a) The accounting equation is as follows:

Date	Assets			=	Liability		+	Shareholder's
	Cash	Equipment	Computer software		Notes Payable	Account Payable		Equity
Jan.2	(21,000)	220,000			199,000
Jan.3		22,000				22,000
Jan.30		(22,000)				(22,000)
Feb.1	(1,100)							(1,100)
Mar. 1	(8,400)		8,400

1b) Journal entries are as follows:

Date	Account and Explanation	Debit ($)	Credit($)
Jan.2	Equipment	220,000
	Cash		21,000
	Notes Payable		199,000
	(Recorded the purchase of Equipment )
Jan.3	Equipment	22,000
	Account Payable		22,000
	(Recorded the purchase of Equipment on credit)
Jan.30	Account Payable	22,000
	Cash		22,000
	(Recorded the payment to Account Payable)
Feb.1	Repairs and Maintanance	1,100
	Cash		1,100
	(Recorded the payment of Repairs and Maintanance)
Mar. 1	Computer Software	8,400
	Cash		8,400
	(Recorded the payment for Computer Software )

2 &3 ) Depreciation is calculated and journal entry is as follows:

Date	Account and Explanation	Debit($)	Credit($)
Dec.31	Depreciation Expenses ( $242,000/5 *2)	96,800
	Accumulated Depreciation		96,800
	(Recorded the depreciation expenses )
Dec.31	Amortization Expenses($8,400 / 24 *10 months)	3,500
	Accumulated Amortization		3,500
	(Recorded the Amortization Expenses )