Question
In: Accounting
On April 1, 2016, the KB Toy Company purchased equipment to be used in its manufacturing...
On April 1, 2016, the KB Toy Company purchased equipment to be
used in its manufacturing process. The equipment cost $57,200, has
an ten-year useful life, and has no residual value. The company
uses the straight-line depreciation method for all manufacturing
equipment.
On January 4, 2018, $14,750 was spent to repair the equipment and
to add a feature that increased its operating efficiency. Of the
total expenditure, $2,900 represented ordinary repairs and annual
maintenance and $11,850 represented the cost of the new feature. In
addition to increasing operating efficiency, the total useful life
of the equipment was extended to 12 years.
Required:
1. Prepare journal entries for the depreciation
for 2016 and 2017.
2. Prepare journal entries for the 2018
expenditure.
3. Prepare journal entries for the depreciation
for 2018.
Solutions
Expert Solution
| General Journal | ||||
| Date | Account | Debit | Credit | |
| 1 | 31-12-2016 | Depriciation Expense (W.N 1) | ||
| Accumulated Depriciation - Equipment | 4290 | |||
| (To Depriciation Expense recorded for the year ended 2016) | 4290 | |||
| 31-12-2017 | Depriciation Expense (W.N 1) | 5720 | ||
| Accumulated Depriciation - Equipment | 5720 | |||
| (To Depriciation Expense recorded for the year ended 2017) | ||||
| 04-01-2018 | Repairs and Maintenance Expense | 2900 | ||
| Equipment | 11850 | |||
| Cash | 14750 | |||
| ( To Repairs & maintenance expense recorded) | ||||
| 3 | 31-12-2017 | Depriciation Expense (W.N 2) | 5760 | |
| Accumulated Depriciation - Equipment | 5760 | |||
| (To Depriciation Expense recorded for the year ended 2018) | ||||
| W.N: 1 | ||||
| Depriciation Expense for 1 year | =(57200/10) | |||
| 5720 | ||||
| Depriciation Expense for April 2016 to December 2016 | =5720*9/12 | |||
| 4290 | ||||
| W.N: 2 | Calculation of Depriciation for the year ended December 2018 | |||
| Equipment Cost | 57200 | |||
| Accumulated Depriciation for the year ended 2017 | 10010 | |||
| Book Value as on 01-01-2018 | 47190 | |||
| Add: Repaire expense capitalised | 11850 | |||
| Book Value depriciable for the year ended 2018 | 59040 | |||
| Extended Life | 12 Yrs | |||
| Depriciable Life (12Yrs less 1.75Yrs) | 10.25 Yrs | |||
| Depriciable Amount for 2018 | 5760 | |||
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