Question

Barton Enterprises purchased equipment on January 1, 2020, at a cost of €350,000. Barton uses the straight‐line depreciation method, a 5‐year estimated useful life, and no residual value. At the end of 2020, independent appraisers determined that the assets have a fair value of €320,000.

Instructions

a. Prepare the journal entry to record 2020 depreciation using the straight‐line method.

b. Prepare the journal entry to record the revaluation of the equipment.

c. Prepare the journal entry to record 2021 depreciation, assuming no additional revaluation.

additional instructions:

4. Prepare the closing journal entries for a. and b.
5. Suppose that at the end of 2021, after the depreciation is recorded per c., the equipment is re-valued to €180,000. Prepare the journal entry to record the revaluation. Then prepare the closing entries required at the end of 2021.
6. Prepare the depreciation entries for 2020 and 2021, assuming the Cost Model was followed in both years.
7. Assume that the equipment is sold on 1 July 2022 for €170,000.
   1. Calculate depreciation for 2022 under both the cost and fair value models. (Hint: Depreciate only up to the date of disposal.)
   2. Prepare the journal entry for the disposal under the cost model.
   3. Prepare the journal entry for the disposal under the fair value model. Do not revalue the equipment on 1 July 2022 (prior to the disposal).
8. In total (for 2020, 2021, and 2022 taken together), which model resulted in the greatest decrease to total comprehensive income?

Answer 1

Revaluation model	Debit	Credit		Cost model	Debit	Credit
a. Journal entry to record 2020 depreciation using the straight‐line method				a. Journal entry to record 2020 depreciation using the straight‐line method
Depreciation expense	70000			Depreciation expense	70000
Accumulated depreciation		70000		Accumulated depreciation		70000
(350000/5)				(350000/5)
Closing journal entry for a.				Closing journal entry for a.
Income Summary	70000			Income Summary	70000
Depreciation expense		70000		Depreciation expense		70000
b.Journal entry to record the revaluation of the equipment at end of 2020				b.Journal entry to record the revaluation of the equipment at end of 2020
Accumulated depreciation	70000			NO Journal Entry
Equipment	320000
Equipment		350000
Revaluation surplus		40000
Closing journal entry for b.				Closing journal entry for b.
Revaluation surplus	40000			NOT APPLICABLE
Other Comprehensive income(under Equity)		40000
c.Journal entry to record 2021 depreciation, assuming no additional revaluation.				c.Journal entry to record 2021 depreciation, assuming no additional revaluation.
Depreciation expense	80000			Depreciation expense	70000
Accumulated depreciation		80000		Accumulated depreciation		70000
(320000/4)
Accumulated depreciation	80000
Equipment	180000			NOT APPLICABLE
OCI	40000
Revaluation loss	20000
Equipment		320000
Closing journal entry for 2021 depn.				Closing journal entry for 2021 depn.
Income Summary	80000			Income Summary	70000
Depreciation expense		80000		Depreciation expense		70000
Closing journal entry for 2021 revaluation loss				Closing journal entry for 2021 revaluation loss
OCI	20000			NOT APPLICABLE
Revaluation loss		20000
For sale of eqpt. On july 1, 2022				For sale of eqpt. On july 1, 2022
Depreciation expense	30000			Depreciation expense	35000
Accumulated depreciation		30000		Accumulated depreciation		35000
(180000/3/2)--depm. For 6 mths.in 2022				(70000/2)--depm. For 6 mths.in 2022
Cash	170000			Cash	170000
Accumulated depreciation	30000			Accumulated depreciation	ekkarill92 Next > < Previous Related Solutions Trainex Corporation purchased equipment on January 1, 2020 at a cost of $500,000. The equipment has... Trainex Corporation purchased equipment on January 1, 2020 at a cost of $500,000. The equipment has an estimated residual value of $50,000 and an estimated life of 5 years. At the end of two years, Trainex reevaluated the useful life of the equipment. Management extended the total useful life an additional 5 years but estimated that the equipment would have no residual value at the end of this time. If the company uses straight-line depreciation, what amount (in whole dollars)... Trainor Corporation purchased equipment on January 1, 2020, at a cost of $500,000. The equipment has... Trainor Corporation purchased equipment on January 1, 2020, at a cost of $500,000. The equipment has an estimated residual value of $50,000 and an estimated life of 5 years. At the end of two years, Trainor revaluated the useful life of the equipment. Management extended the total useful life an additional 5 years but estimated that the equipment would have no residual value at the end of this time. If the company uses straight-line depreciation, what amount would be recorded... Ivan Manufacturing purchased equipment and a delivery van on January 1, 2020. The equipment cost $95,000... Ivan Manufacturing purchased equipment and a delivery van on January 1, 2020. The equipment cost $95,000 and has an estimated useful life of 8 years with a residual value of $10,000. The delivery van cost $125,000 and has an estimated life of 5 years or 200,000 kilometres and a residual value of $20,000. The delivery truck is expected to be driven 25,000 and 50,000 kilometres in 2019 and 2020, respectively. Required Ivan has decided to depreciate the equipment using either... Shoe-production equipment is purchased on January 1, 2020. The relevant data is as follows: Equipment Cost... Shoe-production equipment is purchased on January 1, 2020. The relevant data is as follows: Equipment Cost $10,000 Estimated residual value -1,560 Accounting periods 5 years Shoe-production equipment is purchased on January 1, 2020. The relevant data is as follows: Equipment Cost $10,000 Estimated residual value -1,560 Accounting periods 5 years Units produced 38,000 shoes first year units produced are : 7000 CAD first year units produced are : 5000 CAD first year units produced are : 7000 CAD first year... 1. Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to... 1. Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. Using the sum-of-the-years'-digits method, depreciation for 2019 and book value at December 31, 2019, would be: Multiple Choice $19,200 and $30,800 respectively. $19,200 and $28,800 respectively. $17,600 and $26,400 respectively. $17,600 and $32,400 respectively. 2. Cutter Enterprises purchased equipment for $66,000 on January 1, 2018. The equipment is expected to have a five-year life... Cutter Enterprises purchased equipment for $72,000 on January 1, 2021. The equipment is expected to have... Cutter Enterprises purchased equipment for $72,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,000. Using the straight-line method, depreciation for 2022 and the equipment's book value at December 31, 2022, would be: Multiple Choice $14,400 and $43,200 respectively. $13,200 and $39,600 respectively. $13,200 and $45,600 respectively. $28,800 and $37,200 respectively. Cutter Enterprises purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have... Cutter Enterprises purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $3,600. Using the sum-of-the-years'-digits method, depreciation for 2018 and book value at December 31, 2018, would be: (Do not round depreciation rate per year) Cutter Enterprises purchased equipment for $96,000 on January 1, 2021. The equipment is expected to have... Cutter Enterprises purchased equipment for $96,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,600. Using the double-declining-balance method, the book value at December 31, 2022, would be: Multiple Choice a) $19,200. b) $34,560. c) $35,760. d) $33,660. Cutter Enterprises purchased equipment for $96,000 on January 1, 2018. The equipment is expected to have... Cutter Enterprises purchased equipment for $96,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $4,500. Using the sum-of-the-years'-digits method, depreciation for 2019 and book value at December 31, 2019, would be? Fawkes Enterprises purchased equipment for $196,000 on January 1, 2021. The equipment is expected to have... Fawkes Enterprises purchased equipment for $196,000 on January 1, 2021. The equipment is expected to have a 7-year life and a residual value of $14,000. Fawkes uses the sum-of-the-years'-digits method to calculate depreciation. What amount of depreciation would Fawkes record in 2021 and 2022? What is the book value of the equipment on December 31, 2021 and December 31, 2022? ADVERTISEMENT Subjects Accounting Advanced Math Anatomy and Physiology Biology Chemistry Civil Engineering Computer Science Economics Electrical Engineering Finance History Math Mechanical Engineering Operations Management Physics Psychology Statistics and Probability Nursing Other ADVERTISEMENT Latest Questions NPV Your division is considering two investment projects, each of which requires an up-front expenditure of... Please repond with a 200 word limit paragraph no copy or paste your own words!!! What... Participant Reactivity Think about how participants might react to environmental cues in an experimental situation and... Describe scenarios when you would use a Fixed-size virutal disk, a Dynamic virtual disk, and a... A conductive sphere with radius ? = 1 ? has been increased to the potential ?0... Define a char variable. Read a char value from the keyboard into the variable. Print the... If you wanted to store a birthday within code, what class would you use in Java?... ADVERTISEMENT About @ 2020 WizEdu