Question

*NEED DETAILED EMPHASIS on #3

On April 1, 2019, the KB Toy Company purchased equipment to be used in its manufacturing process. The equipment cost $52,200, 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, 2021, $13,250 was spent to repair the equipment and to add a feature that increased its operating efficiency. Of the total expenditure, $2,400 represented ordinary repairs and annual maintenance, and $10,850 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 2019 and 2020.
2. Prepare journal entries for the 2021 expenditure.
3. Prepare journal entries for the depreciation for 2021.

Answer 1

ANSWER:

1) Journal entries for the depreciation for 2019 and 2020

Date	Particulars	Debit (in $)	Credit (in $)
31/12/20	Depreciation expense (52,200 / 10) * (9 / 12)	3,915‬
	To Accumulated depreciation—Equipment		3,915‬
31/12/21	Depreciation expense (52,200 / 10)	5,220
	To Accumulated depreciation—Equipment		5,220

2) Journal entries for the 2021 expenditure.

Date	Particulars	Debit (in $)	Credit (in $)
04/01/21	Repair expense	2,400
	Equipment	10,850
	To Cash		13,250

3) Journal entries for the depreciation for 2021

Date	Particulars	Debit (in $)	Credit (in $)
31/12/21	Depreciation expense (WN - 1)
	To Accumulated depreciation—Equipment

Working Notes - 1

Particulars	Amount (in $)
Cost	52,200
Less: Accumulated Depreciation (3,915 + 5,220)	(9,135)
	43,065
Add: Addition to equipment	10,850
	53,915
New life (11 years - 1.75 years)	9.25
Depreciation per year	5,829