Question

In: Accounting

Presented below is the trial balance for ABC, Inc. as of December 31, 2008, before adjusting...

Presented below is the trial balance for ABC, Inc. as of December 31, 2008, before adjusting entries:

ABC , INC.

Trial Balance

December 31, 2008

	DR	CR
Cash	$28,400
Accounts Receivable	12,500
Prepaid Insurance	7,200
Equipment	25,000
Accumulated Depreciation – Equipment		$ 800
Unearned Revenue		6,000
Notes Payable		7,950
Retained Earnings		5,000
Common Stock		29,000
Fee Revenue		39,000
Salaries Expense	13,200
Supplies Expense	950
Interest Expense	500
	$ 87,750	$ 87,750

31. The Equipment was purchased on September 1, 2007. It has a useful life of ten years and an estimated salvage value of $1,000. ABC uses the straight-line method of depreciation. The adjusting entry at December 31, 2008 would include a:

a. credit to Accumulated Depreciation –Equipment for $800.

b. credit to Accumulated Depreciation –Equipment for $2,400.

c. debit to Depreciation Expense –Equipment for $800.

d. credit to Equipment for $2,400.

e. none of the above

32. Refer to the previous question. The adjusted balance in Accumulated Depreciation--Equipment on December 31, 2008, after the adjusting entry is:

33. Refer to question #31. At what amount will the Equipment be reported on the financial statements for the year ended December 31, 2008?

Expert Solution

31)

Journal Entry for Depreciation

Depreciation Expenses a/c Dr. 2400

To Accumulated Depreciation 2400

(To record Equipment Depreciation Expenses )

Note: Depreciation Expenses for a year = (25,000-1000)/10

= 2400

* Machine purchased in 2007, Accounting Treatment Asked for 2008.

So Answer will be option B. Credit to Accumulated Depreciation - Equipment for $2400.

32)

Accumulated Depreciation for 2007 = 800

Accumulated Depreciation for 2008 = 2,400

So Total Adjusted Balance in Accumulated Depreciation - Equipment on Dec 31, 2008 will be

(2,400 + 800 = 3,200)

Note :

Machine Puchased on Sept 1, 2007 so depreciation would be charged for 4 months only

so depreciation expense will be 2400 * 4/12 = 800 for 2007.

33) Euipment will be reported on Book Value or carrying value ( cost - Depreciation) in Financial Statements.

So Euipment's Carrying Value on 31st Dec,2008 will be = 25,000-(2400+800)

= 21,800 $ Answer

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