Question

[The following information applies to the questions displayed below.]

Randy’s Restaurant Company (RRC) entered into the following transactions during a recent year.

April		1		Purchased equipment (a new walk-in cooler) for $8,000 by paying $2,500 cash and signing a $5,500 note due in six months.
April		2		Enhanced the equipment (by replacing the air-conditioning system in the walk-in cooler) at a cost of $4,500, purchased on account.
April		30		Wrote a check for the amount owed on account for the work completed on April 2.
May		1		A local carpentry company repaired the restaurant’s front door, for which RRC wrote a check for the full $270 cost.
June		1		Paid $12,720 cash for the rights to use the name and store concept created by a different restaurant that has been successful in the region.

Required:

1. 1-a. Complete the table below, indicating the account, amount and direction of the effect for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)

[The following information applies to the questions displayed below.]

Randy’s Restaurant Company (RRC) entered into the following transactions during a recent year.

April		1		Purchased equipment (a new walk-in cooler) for $8,000 by paying $2,500 cash and signing a $5,500 note due in six months.
April		2		Enhanced the equipment (by replacing the air-conditioning system in the walk-in cooler) at a cost of $4,500, purchased on account.
April		30		Wrote a check for the amount owed on account for the work completed on April 2.
May		1		A local carpentry company repaired the restaurant’s front door, for which RRC wrote a check for the full $270 cost.
June		1		Paid $12,720 cash for the rights to use the name and store concept created by a different restaurant that has been successful in the region.

Required:

1. 1-a. Complete the table below, indicating the account, amount and direction of the effect for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)

[The following information applies to the questions displayed below.]

Randy’s Restaurant Company (RRC) entered into the following transactions during a recent year.

April		1		Purchased equipment (a new walk-in cooler) for $8,000 by paying $2,500 cash and signing a $5,500 note due in six months.
April		2		Enhanced the equipment (by replacing the air-conditioning system in the walk-in cooler) at a cost of $4,500, purchased on account.
April		30		Wrote a check for the amount owed on account for the work completed on April 2.
May		1		A local carpentry company repaired the restaurant’s front door, for which RRC wrote a check for the full $270 cost.
June		1		Paid $12,720 cash for the rights to use the name and store concept created by a different restaurant that has been successful in the region.

Required:

1. 1-a. Complete the table below, indicating the account, amount and direction of the effect for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)

[The following information applies to the questions displayed below.]

Randy’s Restaurant Company (RRC) entered into the following transactions during a recent year.

April		1		Purchased equipment (a new walk-in cooler) for $8,000 by paying $2,500 cash and signing a $5,500 note due in six months.
April		2		Enhanced the equipment (by replacing the air-conditioning system in the walk-in cooler) at a cost of $4,500, purchased on account.
April		30		Wrote a check for the amount owed on account for the work completed on April 2.
May		1		A local carpentry company repaired the restaurant’s front door, for which RRC wrote a check for the full $270 cost.
June		1		Paid $12,720 cash for the rights to use the name and store concept created by a different restaurant that has been successful in the region.

Required:

1. 1-a. Complete the table below, indicating the account, amount and direction of the effect for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)

[The following information applies to the questions displayed below.]

Randy’s Restaurant Company (RRC) entered into the following transactions during a recent year.

April		1		Purchased equipment (a new walk-in cooler) for $8,000 by paying $2,500 cash and signing a $5,500 note due in six months.
April		2		Enhanced the equipment (by replacing the air-conditioning system in the walk-in cooler) at a cost of $4,500, purchased on account.
April		30		Wrote a check for the amount owed on account for the work completed on April 2.
May		1		A local carpentry company repaired the restaurant’s front door, for which RRC wrote a check for the full $270 cost.
June		1		Paid $12,720 cash for the rights to use the name and store concept created by a different restaurant that has been successful in the region.

Required:

1. 1-a. Complete the table below, indicating the account, amount and direction of the effect for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)

[The following information applies to the questions displayed below.]

Randy’s Restaurant Company (RRC) entered into the following transactions during a recent year.

April		1		Purchased equipment (a new walk-in cooler) for $8,000 by paying $2,500 cash and signing a $5,500 note due in six months.
April		2		Enhanced the equipment (by replacing the air-conditioning system in the walk-in cooler) at a cost of $4,500, purchased on account.
April		30		Wrote a check for the amount owed on account for the work completed on April 2.
May		1		A local carpentry company repaired the restaurant’s front door, for which RRC wrote a check for the full $270 cost.
June		1		Paid $12,720 cash for the rights to use the name and store concept created by a different restaurant that has been successful in the region.

Required:

1. 1-a. Complete the table below, indicating the account, amount and direction of the effect for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)

[The following information applies to the questions displayed below.]

Randy’s Restaurant Company (RRC) entered into the following transactions during a recent year.

April		1		Purchased equipment (a new walk-in cooler) for $8,000 by paying $2,500 cash and signing a $5,500 note due in six months.
April		2		Enhanced the equipment (by replacing the air-conditioning system in the walk-in cooler) at a cost of $4,500, purchased on account.
April		30		Wrote a check for the amount owed on account for the work completed on April 2.
May		1		A local carpentry company repaired the restaurant’s front door, for which RRC wrote a check for the full $270 cost.
June		1		Paid $12,720 cash for the rights to use the name and store concept created by a different restaurant that has been successful in the region.

Required:

1. 1-a. Complete the table below, indicating the account, amount and direction of the effect for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)

1. 1-b. Prepare the journal entries for each of the above transactions.
2. 2. For the tangible and intangible assets acquired in the preceding transactions, determine the amount of depreciation and amortization that Randy’s Restaurant Company should report for the quarter ended June 30. Equipment is depreciated using the straight-line method with a useful life of five years and no residual value. The RRC franchise right is amortized using the straight-line method with a useful life of four years and no residual value.
3. 3. Prepare a journal entry to record the depreciation and amortization calculated in requirement 2.

Answer 1

Part 1a

	Account	Main Account	amount	direction
April 1	Equipment	Asset	8,000	Increase in Asset
	Cash	Asset	2,500	Decrease in Asset
	Note Payable	Liability	5,500	Increase in Liability
April 2	Equipment	Asset	4,500	Increase in Asset
	Accounts payable	Liability	4,500	Increase in Liability
April 30	Accounts payable	Liability	4,500	Decrease in Liability
	Cash	Asset	4,500	Decrease in Asset
May 1	Repair and Maintenance expense	Equity [Expense]	270	Decrease in Equity [due to increase in expense]
	Cash	Asset	270	Decrease in Asset
June 1	Franchise	Asset	12,720	Increase in Asset
	Cash	Asset	12,720	Decrease in Asset

Part 1b

Date	Account titles and explanation	Debit	Credit
April 1	Equipment	8,000
	Cash		2,500
	Note Payable		5,500
	(To record purchase of equipment.)
April 2	Equipment	4,500
	Accounts payable		4,500
	(To record enhanced the equipment.) [Total equipment cost = 8000 + 4500 = 12500]
April 30	Accounts payable	4,500
	Cash		4,500
	(To record Wrote a check for the amount owed on account.)
May 1	Repair and Maintenance expense	270
	Cash		270
	(To replace the leather seat.) (Hint: repaired the restaurant’s front door should not improve the operating efficiency nor Increase useful life of the asset. Hence, Cost should not be capitalized.)
June 1	Franchise	12,720
	Cash		12,720
	(To record Cash paid for Franchise)

Part 2

Depreciation expense - Equipment [life= 5 years = 60 months] [Apr to June = 3 months] (12500*3/60)	$                625
Amortization expense [life= 4 years = 48 months] [June = 1 month] (12720*1/48)	$                265

Part 3

Date	Account titles and explanation	Debit	Credit
June 30	Depreciation expense - Equipment	625
	Accumulated depreciation - Equipment		625
	(To record depreciation.)
June 30	Amortization expense	265
	Accumulated Amortization [Franchise]		265
	(To record Amortization expense on franchise]