Question

Mark's Repair service uses the straight line method of depreciation.The company's fiscal year end is December 31.The following transactions and events occured during the first three years

2016 July 1 Purchased equipment from the Equipment center for $5,500 cash plus sales tax $305 and shipping costs of $250

Nov 3 Incurred ordinary repairs on computer of $240

Dec 31. Recorded 2016 Depreciation on the basis of a four year life and estimated salvage value of $455

2017 Dec 31. Recorded 2017 Depreciation

2018 Jan 1 Paid $1,800 for a major upgrade of the equipment.This expenditure is expected to increase the operating efficiency and capacity of the equipment

Prepare the necessary journal entries (Show your computations)

 

Answer 1

Date	Account Title & Explanation	Debit$	Credit$
01-Jul-21	Equipment A/C ( $5,500+ $305 +$250)	6,055
	To Cash A/C		6,055
	(To record equipment purchased for cash)
03-Nov-21	Repairs Expense A/C	240
	To Cash A/C		240
	(To record repairs Expense)
31-Dec-21	Depreciation Expense A/C ($6,055-$455/ 4)  x 6 /12	700
	To Accumulated Depreciation - Equipment A/C		700
	(To record Depreciation Expense)
31 -Dec -22	Depreciation Expense A/C ( $6,055 -$455) / 4	1,400
	To Accumulated Depreciation - Equipment A/C		1,400
	(To record depreciation expense)
01 - Jan -23	Equipment A/C	1,800
	To Cash A/C		1,800
	(To record major upgrade to the equipment)

Answer to the above clearly shown in the explanation option