Question

The following transactions and adjusting entries were completed by a paper-packaging company called Gravure Graphics International during 2018 and 2019. The company uses straight-line depreciation for trucks and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents.

2018
January		2		Paid $88,000 cash to purchase storage shed components.
January		3		Paid $4,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $7,000.
April		1		Paid $31,000 cash to purchase a pickup truck for use in the business. The truck has an estimated useful life of five years and a residual value of $5,000.
May		13		Paid $300 cash for minor repairs to the pickup truck's upholstery.
July		1		Paid $27,000 cash to purchase patent rights on a new paper bag manufacturing process. The patent is estimated to have a remaining useful life of five years.
December		31		Recorded depreciation and amortization on the pickup truck, storage shed, and patent.
2019
June		30		Sold the pickup truck for $26,000 cash. (Record the depreciation on the truck prior to recording its disposal.)
December		31		Recorded depreciation on the storage shed. Also determined that the patent was impaired and wrote off its remaining book value (i.e., wrote down the book value to zero).

Required:

Prepare the journal entries required on each of the above dates. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Answer 1

Answer :

Date		Account title	Debit	credit
2018
Jan 2		storage shed components	88000
		cash		88000
Jan 3		storage shed components	4000
		cash		4000
April 1		Truck	31000
		cash		31000
may 13		Repair and maintenance expense	300
		cash		300
July 1		Patent	27000
		cash		27000
December 31		Depreciation expense -storage shed components	8500
		Depreciation expense -Truck	3900
		Accumulated depreciation-storage shed components		8500
		Depreciation expense -Truck		3900
December 31		Amortisation expense-patent	2700
		Accumulated amortisation		2700
2019
June 30		Depreciation expense -truck	2600
		Accumulated depreciation -truck [5200*6/12] [jan-june]		2600
June 30		cash	26000
		Accumulated depreciation [3900+2600]]	6500
		Gain on sale of truck		1500
		Truck		31000
Dec 31		Depreciation expense	8500
		Accumulated depreciation -storage shed components		8500
Dec 31		Impairment loss	24300
		Accumulated amortisation	2700
		Patent		27000

Depreciation for 2018 :storage shed = [cost -salvage value ]/useful life

                      =[(88000+4000)-7000]/10

                      = [92000 -7000]/10

                     = 85000/10

                       =8500

Depreciation expense for 2018 :Truck = [31000-5000]/5

                       = 5200

depreciation for part months of 2018 (april - dec ]= 5200*9/12= 3900

Amortisation expense - patent =[27000/5]=5400*6/12 = 2700