Question

1. The Minnie Company purchased a machine on 7/1/16 for $11800. The machine has an estimated 12-year life and an estimated $10000salvage value
   1. What is the required adjusting entry at 12/31/16?
   2. What is the book value at 12/31/16?
   3. What is the required adjusting entry at 12/31/17?
   4. What is the book value at 12/31/17?
2. The Donald Company purchased office furniture on 3/31/14 for $50000. The useful life of this furniture is estimated as 10 years, and it is expected to have a $2000 salvage value at the end of the useful life.
   1. What is the annual depreciation expense?
   2. What is the monthly depreciation expense?
   3. What is the required adjusting entry at 12/31/14?
   4. What is the book value at 12/31/17?

1. The Daisy Company purchased retail fixtures on 9/1/15 for $77500 for a new store in Orlando, FL. They estimate these fixtures will have a salvage value of $2500 at the end of their useful life, which is estimated as 4 years.
   1. What is the required adjusting entry at 12/31/15?
   2. What is the book value at 12/31/15?

Answer 1

solution 1 : given that purchase price of a machine = $11,800

date of purchase = 1st july 2016

useful life of machine = 12 years

salvage value = $10,000

working:

so Deprication for the year ended 31dec,2016 =

[(pruchase price - salvage value) / useful life]xno. of month use /12 month

=[( $11,800- $10,000) / 12] x 6/12

=$75

Deprication for the year ended 31dec,2017 = [( $11,800- $10,000) / 12]

= $150

a)What is the required adjusting entry at 12/31/16?

answer : Deprication expenses -machine a/c Dr. ...........$75

to Accumulated deprication expenses.....................$75

(Deprication charged for the year 2016)

Alternative :

Deprication A/c Dr. .....................$75

to Machine A/c.............................$75

  (Deprication charged for the year 2016)

Profit & Loss A/c Dr .............................$75

to  Deprication A/c.............................$75

(being closing entry for Depeication)

b)What is the book value at 12/31/16?

Answer:purchase price of machine = $11,800

less: Deprication for 2016 = ( $75)

so Book value of Machine on 31/12/2016 =$11,725

c)What is the required adjusting entry at 12/31/17

Answer

Deprication expenses -machine a/c Dr. ...........$150

to Accumulated deprication expenses.....................$150

(Deprication charged for the year 2017)

Alternative :

Deprication A/c Dr. .....................$150

to Machine A/c.............................$150

  (Deprication charged for the year 2017)

Profit & Loss A/c Dr .............................$150

to  Deprication A/c.............................$150

(being closing entry for Depeication)

d)What is the book value at 12/31/17

answer

book value as on 1st jan 2017 = $11,725

less : Deprication for 2017 = ($150)

Book value of Machine on 31/12/2017= $11,575

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Solution 2: Given that purchase price of furniture = $50,000

useful life of furniture = 10 years

date of purchase = 31st march ,2014

salvage value = $2000

working:

Deprication = (cost of assets - slavage price ) / use ful life

so Deprication for year 2014 = [($50,000 -$2000) / 10 ] x 9/12

= $36,00

annual Deprication = $4800

a)What is the annual depreciation expense

answer = $4800

b)What is the monthly depreciation expense

answer $48,00 /12 =$400

c)What is the required adjusting entry at 12/31/14?

Answer

Deprication expenses -machine a/c Dr. ...........$3600

to Accumulated deprication expenses.....................$3600

(Deprication charged for the year 2014)

Alternative :

Deprication A/c Dr. .....................$3600

to office furniture A/c.............................$3600

  (Deprication charged for the year 2014)

Profit & Loss A/c Dr .............................$36,00

to  Deprication A/c.............................$3600

(being closing entry for Depeication)

d)What is the book value at 12/31/17?

Answer

Book value on 31/12/2014 = $46,400 [ 50,000 - 3600]

less:deprication for 2015 = ($4800)

deprication for 2016 = ( $4800)

deprication for 2016 = ( $4800)

book value as on 31/12/2017 = $32,000

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Solution 3   

Given that purchase price of furniture = $77,500

useful life of furniture = 4years

date of purchase = 1st Sep ,2015

salvage value = $2500

Working ;

Deprication = (cost of assets - slavage price ) / use ful life

so Deprication = [($77,500 - $2500) /4] = $18,750

Deprication for 2015 = $18,750 x 3/12 = $4687.5

A)What is the required adjusting entry at 12/31/15?

Answer  

Deprication expenses -fixtures a/c Dr. ...........$4687.5

to Accumulated deprication expenses.....................$4687.5

(Deprication charged for the year 2015)

Alternative :

Deprication A/c Dr. ....................$4687.5

to fixtures A/c............................$4687.5

  (Deprication charged for the year 2015)

Profit & Loss A/c Dr .............................$4687.5

to  Deprication A/c.............................$4687.5

(being closing entry for Depeication)

b)What is the book value at 12/31/15?

Answer cost of Fixtures = $77,500

less: Deprication for 2015 = ($4687.5)

book value as on 31/12/15 =$72812.5