Question

The following transactions and adjusting entries were completed by a paper-packaging company called Gravure Graphics International during 2018 and 2019. The company uses straight-line depreciation for trucks and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents.

2018
January		2		Paid $95,000 cash to purchase storage shed components.
January		3		Paid $5,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $10,000.
April		1		Paid $38,000 cash to purchase a pickup truck for use in the business. The truck has an estimated useful life of five years and a residual value of $8,000.
May		13		Paid $250 cash for minor repairs to the pickup truck's upholstery.
July		1		Paid $20,000 cash to purchase patent rights on a new paper bag manufacturing process. The patent is estimated to have a remaining useful life of five years.
December		31		Recorded depreciation and amortization on the pickup truck, storage shed, and patent.
2019
June		30		Sold the pickup truck for $33,000 cash. (Record the depreciation on the truck prior to recording its disposal.)
December		31		Recorded depreciation on the storage shed. Also determined that the patent was impaired and wrote off its remaining book value (i.e., wrote down the book value to zero).

Required:

Prepare the journal entries required on each of the above dates. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Answer 1

The journal entries are as follows:

Date	Account and Explanation	Debit ($)	Credit($)
2018
Jan. 2	Building	95,000
	Cash		95,000
	(Recorded the purchase of storage shed components )
Jan. 3	Building	5,000
	Cash		5,000
	(Recorded the paid for storage shed erected )
April 1	Truck	38,000
	Cash		38,000
	(Recorded the purchase of truck )
May 13	Repairs	250
	Cash		250
	(Recorded the payment repair expenses )
July 1	Patent	20,000
	Cash		20,000
	(Recorded the Purchase of Patent )
Dec.31	Depreciation - Building($95,000 + $5,000) /10 years *2	20,000
	Accumulated Depreciation - Building		20,000
	(Recorded the Depreciation on Building )
Dec.31	Depreciation - Truck ($38,000 - $8,000) / 5 Years *9/12	4,500
	Accumulated Depreciation - Truck		4,500
	(Recorded the depreciation on Truck )
Dec.31	Amortizartion Expenses - Patent ($20,000 / 5 Years)*6/12	2,000
	Accumulated Amortizartion		2,000
	(Recorded the amortizartion Expenses )
2019
June 30	Depreciation - Truck	3,000
	Accumulated Depreciation - Truck		3,000
	(Recorded the depreciation on Truck )
June 30	Cash	33,000
	Accumulated Depreciation - Truck ($4,500 + $3,000)	7,500
	Gain on Sale of Truck		2,500
	Truck		38,000
	(Recorded the sale of the truck and earned a gain)
Dec.31	Depreciation - Building($100,000 - $20,000) /10 years *2	16,000
	Accumulated Depreciation - Building		16,000
	(Recorded the depreciation for the current year)
Dec.31	Amortizartion Expenses - Patent ($20,000 / 5 Years)	4,000
	Accumulated Amortizartion		4,000
	(Recorded the Amortizartion Expenses on Patent )
Dec.31	Accumulated Amortizartion - Patent ($2,000 + $4,000)	6,000
	Amortizartion Expenses		6,000
	(Recorded the reversal of Accumulated Amortizartion )
Dec.31	Impairment Loss ($20,000 - $6,000)	14,000
	Patent		14,000
	(Recorde the impairment Loss on patent )