Financial Accounting Fundamentals:
Financial Accounting Fundamentals:
5th Edition
ISBN: 9780078025754
Author: John Wild
Publisher: McGraw-Hill/Irwin
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 8, Problem 4AP
To determine

Prepare journal entries to record the given transactions and events.

Expert Solution & Answer
Check Mark

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Depreciation expense:

Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolescence.

Prepare journal entry to record the cost of the loader as follows:

DateAccount Title and Explanation

Debit

($)

Credit

($)

January 1, 2014Equipment300,600 
     Cash 300,600
 (To record the costs of loader)  

Table (1)

Working Note:

Calculate the costs of loader.

Costs of loader=(Purchase cost+Sales tax+Transportation cost)=$287,600+$11,500+$1,500=$300,600

  • Equipment is an asset account and it is increased. Therefore debit equipment account.
  • Cash is an asset account and it is decreased. Therefore credit cash account.

Prepare journal entry to record the betterment of the loader as follows:

DateAccount Title and Explanation

Debit

($)

Credit

($)

January 3, 2014Equipment4,800 
     Cash 4,800
 (To record the betterment of loader)  

Table (2)

  • Equipment is an asset account and it is increased. Therefore debit equipment account.
  • Cash is an asset account and it is decreased. Therefore credit cash account.

Prepare journal entry to record the depreciation expense as follows:

DateAccount title and ExplanationPost Ref.

Debit

(In $)

Credit

(In $)

December 31, 2014Depreciation expense 70,850 
     Accumulated depreciation  70,850
 (To record the depreciation expense)   

Table (3)

Working Note:

Calculate the depreciable cost.

 Amount (In $)
Total original cost300,600
Cost of betterment4,800
Revised cost of equipment305,400
Less: Revised salvage ($20,600+$1,400)22,000
Depreciable Cost$283,400

Table (4)

Calculate the depreciation expense for the year 2014 after January 3rd betterment.

Depreciation =  Depreciable cost Estimated useful life of the asset = $283,400 4years =$70,850

  • Depreciation expense is a component of retained earnings. It decreases the retained earnings. Thus, depreciation expense is debited.
  • Accumulated depreciation is a contra asset which decreases the value of the asset. Increase in accumulated depreciation decreases the asset’s value. Thus, accumulated depreciation on equipment is credited.

Prepare journal entry to record the extraordinary repair on loader as follows:

DateAccount Title and Explanation

Debit

($)

Credit

($)

January 1, 2015Equipment5,400 
     Cash 5,400
 (To record the extraordinary repair on loader)  

Table (5)

  • Equipment is an asset account and it is increased. Therefore debit equipment account.
  • Cash is an asset account and it is decreased. Therefore credit cash account.

Prepare journal entry to record the ordinary repair on the loader as follows:

DateAccount Title and Explanation

Debit

($)

Credit

($)

February 17, 2015Repairs expense–Equipment820 
     Cash 820
 (To record the betterment of loader)  

Table (6)

  • Repairs expenses are the components of the stockholder’s equity. An expense decreases the stockholder’s equity. Thus, repairs expenses account is debited.
  • Cash is an asset account, and it is decreased. Thus, credit the cash account.

Prepare journal entry to record the depreciation expense as follows:

DateAccount title and ExplanationPost Ref.

Debit

(In $)

Credit

(In $)

December 31, 2015Depreciation expense 43,590 
     Accumulated depreciation  43,590
 (To record the depreciation expense)   

Table (7)

Working Note:

Calculate the depreciable cost.

 Amount (In $)
Total original cost ($305,400+$5,400)310,800
Less: Accumulated depreciation70,850
Book value239,950
Less: Salvage22,000
Depreciable Cost$217,950

Table (8)

Calculate the depreciation expense for the year 2015 after January 1st extraordinary repair.

Depreciation =  Depreciable cost Remaining estimated useful life of the asset = $217,950 4years1year+2years = $217,950 5years =$43,590

  • Depreciation expense is a component of retained earnings. It decreases the retained earnings. Thus, depreciation expense is debited.
  • Accumulated depreciation is a contra asset which decreases the value of the asset. Increase in accumulated depreciation decreases the asset’s value. Thus, accumulated depreciation on equipment is credited.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 8 Solutions

Financial Accounting Fundamentals:

Ch. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQCh. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 21DQCh. 8 - Prob. 1QSCh. 8 - Prob. 2QSCh. 8 - Prob. 3QSCh. 8 - Prob. 4QSCh. 8 - QS 8-5 Computing revised depreciation On January...Ch. 8 - Prob. 6QSCh. 8 - Prob. 7QSCh. 8 - Prob. 8QSCh. 8 - Prob. 9QSCh. 8 - Prob. 10QSCh. 8 - QS 8-11 Classifying assets Identify the following...Ch. 8 - Prob. 12QSCh. 8 - Prob. 13QSCh. 8 - Prob. 14QSCh. 8 - Prob. 15QSCh. 8 - Prob. 1ECh. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Exercise 8-7 Straight-line depreciation In early...Ch. 8 - Exercise 8-8 Double-declining-balance...Ch. 8 - Prob. 9ECh. 8 - Exercise 8-10 Double-declining-balance...Ch. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Prob. 14ECh. 8 - Prob. 15ECh. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Prob. 19ECh. 8 - Prob. 20ECh. 8 - Prob. 21ECh. 8 - Prob. 22ECh. 8 - Prob. 23ECh. 8 - Prob. 24ECh. 8 - Prob. 25ECh. 8 - PROBLEM SET A Problem 8-1A Plant asset costs;...Ch. 8 - Prob. 2APCh. 8 - Prob. 3APCh. 8 - Prob. 4APCh. 8 - Prob. 5APCh. 8 - Prob. 6APCh. 8 - Prob. 7APCh. 8 - Prob. 8APCh. 8 - Prob. 1BPCh. 8 - Prob. 2BPCh. 8 - Prob. 3BPCh. 8 - Prob. 4BPCh. 8 - Prob. 5BPCh. 8 - Prob. 6BPCh. 8 - Prob. 7BPCh. 8 - Prob. 8BPCh. 8 - Prob. 8SPCh. 8 - Prob. 1BTNCh. 8 - Prob. 2BTNCh. 8 - Prob. 3BTNCh. 8 - Prob. 7BTNCh. 8 - Prob. 9BTN
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Accounting for Derivatives_1.mp4; Author: DVRamanaXIMB;https://www.youtube.com/watch?v=kZky1jIiCN0;License: Standard Youtube License
Depreciation|(Concept and Methods); Author: easyCBSE commerce lectures;https://www.youtube.com/watch?v=w4lScJke6CA;License: Standard YouTube License, CC-BY