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Prepare the adjusting journal entries for ten years of an equipment's life. Cost of equipment $60,000....

Prepare the adjusting journal entries for ten years of an equipment's life. Cost of equipment $60,000. They will last 10 years. The salvage value will be $5,000. The depreciation rate is 10% per year. Prepare ten Adjusting entries for this equipment using each of the two methods: a. The Straight Line Method and b. The Declining Balance Method.

Solutions

Expert Solution

Prepare Depreciation schedule as per Double Declining method:

Assume Asset purchase on January 2000

Double declining rate = Depreciation rate   2

= 10% 2 = 20%

________________________________________________________________

Prepare Adjusting Entries as follows:

Date Account Titles Debit Credit
2000 Depreciation Expense $12,000
Accumulated depreciation $12,000
2001 Depreciation Expense $9,600
Accumulated depreciation $9,600
2002 Depreciation Expense $7,680
Accumulated depreciation $7,680
2003 Depreciation Expense $6,144
Accumulated depreciation $6,144
2004 Depreciation Expense $4,915
Accumulated depreciation $4,915
2005 Depreciation Expense $3,932
Accumulated depreciation $3,932
2006 Depreciation Expense $3,146
Accumulated depreciation $3,146
2007 Depreciation Expense $2,517
Accumulated depreciation $2,517
2008 Depreciation Expense $2,013
Accumulated depreciation $2,013
2009 Depreciation Expense $1,611
Accumulated depreciation $1,611

__________________________________________________________________________

Compute Depreciation as per Straight Line Method:

Annual Depreciation = [Cost - Salvage value]   Useful Life

= [$60,000 - $5,000] 10 years

= $5,500 per year

____________________________________________________________

Prepare Adjusting Entries as per S.L.M as follows:

Date Account Titles Debit Credit
2000 Depreciation Expense $5,500
Accumulated depreciation $5,500
2001 Depreciation Expense $5,500
Accumulated depreciation $5,500
2002 Depreciation Expense $5,500
Accumulated depreciation $5,500
2003 Depreciation Expense $5,500
Accumulated depreciation $5,500
2004 Depreciation Expense $5,500
Accumulated depreciation $5,500
2005 Depreciation Expense $5,500
Accumulated depreciation $5,500
2006 Depreciation Expense $5,500
Accumulated depreciation $5,500
2007 Depreciation Expense $5,500
Accumulated depreciation $5,500
2008 Depreciation Expense $5,500
Accumulated depreciation $5,500
2009 Depreciation Expense $5,500
Accumulated depreciation $5,500

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