Question

In: Accounting

On July 1, Andrew Company purchased equipment at a cost of $150,000 that has a depreciable...

On July 1, Andrew Company purchased equipment at a cost of $150,000 that has a depreciable cost of $120,000 and an estimated useful life of 3 years or 60,000 hours.

Required:

Using straight-line depreciation, prepare the journal entry to record depreciation expense for (a) the first year, (b) the second year, and (c) the last year on December 31. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
Andrew Company
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
121 Equipment
122 Accumulated Depreciation
132 Goodwill
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
EXPENSES
510 Cost of Merchandise Sold
520 Salaries Expense
521 Advertising Expense
522 Supplies Expense
523 Delivery Expense
524 Rent Expense
525 Insurance Expense
531 Repairs and Maintenance Expense
541 Depreciation Expense
544 Amortization Expense-Patents
591 Miscellaneous Expense
710 Interest Expense

Using straight-line depreciation, prepare the journal entry to record depreciation expense for (a) the first year, (b) the second year, and (c) the last year on December 31. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

3

4

5

6

Solutions

Expert Solution

  • Workings

A

Cost

$          150,000.00

B

Residual Value

$            30,000.00

C=A - B

Depreciable base

$          120,000.00

D

Life [in years]

3

E=C/D

Annual SLM depreciation

$            40,000.00

F = E x 6/12

First Year Depreciation [for 6 months: 1 Jul to 31 Dec]

$ 20,000.00

G

Second year’s depreciation

$ 40,000.00

H

Third year’s depreciation

$ 40,000.00

I = E x 6/12

Last Year’s depreciation for 6 months [1Jan to 30 June]

$ 20,000.00

  • Journal entries

DATE

DESCRIPTION

POST. REF.

DEBIT

CREDIT

1

31 Dec - First year

Depreciation expense

541

$                   20,000

2

Accumulated Depreciation

122

$       20,000

3

31 Dec - Second year

Depreciation expense

541

$                   40,000

4

Accumulated Depreciation

122

$       40,000

5

31 Dec - Last Year or 30 June Last Year

Depreciation expense

541

$                   20,000

6

Accumulated Depreciation

122

$          20,000


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