Question

On October 1, 2019, Oriole Manufacturing Company purchased a piece of high-tech equipment for $90,300 cash. Oriole estimated the equipment would have a 6-year useful life and a residual value of $8,700. The company uses straight-line depreciation and has a September 30 fiscal year end.

On October 1, 2021, Oriole paid $15,400 cash to upgrade the equipment. It is expected that the upgrade will significantly reduce the operating costs of the equipment. Oriole also reviewed the equipment's expected useful life and estimated that, due to changing technology, the equipment’s total expected useful life will be 5 years and its residual value will be $4,700.

a) Calculate the annual depreciation expense for the first two years of the equipment's life.

Annual depreciation expense ________________ per year

b) Calculate the carrying amount of the equipment at September 30, 2021.

Carrying amount ___________________

c) Record the expenditure to upgrade the equipment on October 1, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Oct. 1
	(To record upgrade to equipment.)

d)

Record the annual depreciation of the equipment on September 30, 2022. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Sept. 30

(To record depreciation expense.)

List of Accounts:

• Accounts Payable
• Accumulated Amortization - Copyrights
• Accumulated Amortization - Licence
• Accumulated Amortization - Patents
• Accumulated Amortization - Trademark
• Accumulated Depreciation - Building
• Accumulated Depreciation - Equipment
• Accumulated Depreciation - Furniture
• Accumulated Depreciation - Land Improvements
• Accumulated Depreciation - Mine
• Accumulated Depreciation - Vehicles
• Advertising Expense
• Amortization Expense
• Building
• Cash
• Copyrights
• Cost of Goods Sold
• Depreciation Expense
• Equipment
• Furniture
• Gain on Disposal
• Goodwill
• Impairment Loss
• Indefinite Life Intangibles
• Interest Expense
• Interest Payable
• Interest Receivable
• Interest Revenue
• Inventory
• Land
• Land Improvements
• Licence
• Loss on Disposal
• Loss on Fair Value Adjustment of Land
• Maintenance Expense
• Mortgage Payable
• No Entry
• Notes Payable
• Notes Receivable
• Operating Expenses
• Other Expenses
• Patents
• Prepaid Insurance
• Property Tax Expense
• Research Expense
• Resource
• Repairs Expense
• Trademark
• Training Expense
• Vehicles

Answer 1

a)	Depreciation expense
	original cost			90,300
	less :salvage value			-8,700
	Depreciable cost			81,600
	estimated useful life			6
	Depreciation expense			13600
	Annual depreciation expense			13600	per year
b)	original cost			90,300
	Accumulated dep 2 years			27200
	Carrying amount			63,100
c)	Date	Account titles & Explanations				Debit	Credit
	1-Oct	Equipment				15,400
		cash					15,400
d)	Date	Account titles & Explanations				Debit	Credit
	30-Sep	Depreciation expense				24600
		Accumulated depreciation-Equipment					24600
	Carrying value				63,100
	Add:addittion				15,400
	total cost				78,500
	less:Residual value				4,700
	Depreciable cost				73,800
	Revised estimated life (5-2)				3
	Depreciation per year				24600