Question

Highsmith Rental Company purchased an apartment building early in 2021. There are 15 apartments in the building and each is furnished with major kitchen appliances. The company has decided to use the group depreciation method for the appliances. The following data are available: Service Life (in Years) Appliance Stoves Refrigerators Dishwashers Cost $43,000 38,000 36,000 Residual Value $4,000 6,000 5,000 una In 2024, two new refrigerators costing $4,100 were purchased for cash. In that same year, the old refrigerators, which originally cost $4,300, were sold for $1,600. Required: 1. Calculate the group depreciation rate, group life, and depreciation for 2021. 2. Prepare the journal entries to record the purchase of the new refrigerators and the sale of the old refrigerators. Required 1 Required 2 Calculate the group depreciation rate, group life, and depreciation for 2021. (Round "Group depreciation rate" and "Group life" answers to 2 decimal places.) Group depreciation rate Group life Depreciation for 2021 (Straight Line) years < Required 1 Required 2 >

Answer 1

Answer:

1.)

Asset	Cost (A)	Residual Value (B)	Depreciation base C=A-B	Estimated Life (years)	Annual Depreciation (straight line)
Stoves	$43,000	$4,000	$39,000	6	$6,500
Refrigerator	$38,000	$6,000	$32,000	5	$6,400
Dishwasher	$36,000	$5,000	$31,000	4	$7,750
	$117,000	$15,000	$102,000		$20,650
Group Depreciation Rate= $20650/$117000 =17.65%
Group Life= $102000/$20650 = 4.94 Years
Depreciation for 2018 (SL) = 20,650

2.)

Journal Entry
S.No.	Account Tittle	Debit ($)	Credit ($)
1.	Refrigerator	$4,100
	Cash		$4,100
	(To Record Purchase of New Refrigerators)
2.	Cash	$1,600
	Accumulated Depreciation	$2,700
	Refrigerator		$4,300
	(To record the sale of old refrigerators)