Question

PA9-4 Recording Transactions and Adjustments for Tangible and Intangible Assets [LO 9-1, LO 9-2, LO 9-3, LO 9-4, LO 9-5, LO 9-6] 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 $95,000 cash to purchase storage shed components. January 3 Paid $5,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $10,000. April 1 Paid $38,000 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 $8,000. May 13 Paid $250 cash for minor repairs to the pickup truck's upholstery. July 1 Paid $20,000 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 $33,000 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.)

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Answer 1

General Journal

Date	Account Title and Explanation	Debit	Credit
Jan 2 2018	Storage shed	$95,000
	Cash		$95,000
	( To record the purchase of storage shed )
Jan 3 2018	Storage shed	$ 5,000
	Cash		$ 5,000
	( To capitalize the construction cost of the storage shed )
April1 2018	Truck	$38,000
	Cash		$38,000
	( To record the purchase of truck )
May 13 2018	Maintenance and Repairs Expenses	$ 250
	Cash		$ 250
	( To record the payment for truck repairs )
July 1 2018	Patent	$20,000
	Cash		$20,000
	(To record the acquisition of patent rights)
Dec31 2018	Depreciation Expanse - Storage shed ( 1/10=10%*2=20%* $ 100,000)	$20,000
	Accumulated Depreciation		$20,000
	(To record the 2018 depreciation of storage shed )
	Depreciation Expanse - Truck ((($ 38,000 - $ 8,000) / 5) * 9/12)	$4,500
	Accumulated Depreciation		$ 4,500
	(To record the 2018 depreciation truck)
	Amortization Expenses Patents ( (20,000/5 ) 6/12))	$ 2,000
	Accumulated Amortization Patent		$ 2,000
	(To record the amortization on patent)
Jun 30 2019	Depreciation Expanse Truck ($38,000- $ 8,000/5 years )* 6/12	$ 3,000
	Accumulated Depreciation Truck		$ 3,000
	( To record the 2019 depreciation of truck prior to its selling )
	Cash	$ 33,000
	Accumulated Depreciation Truck( 2018 $ 4500 + 2019 $ 3000)	$ 7,500
	Truck		$38,000
	Gain on sale of Truck		$ 2,500
Dec 31 2019	Depreciation Expanse storage shed ($100,000-$ 20,000) = $80,000 * 20% )	$16,000
	Accumulated Depreciation Storage shed		$ 16,000
	(TO record the 2019 depreciation on storage shed )
	Loss on write off of Patent( $ 20,000- $ 2,000)	$18,000
	Accumulated Amortization Patent	$ 2,000
	Patent		$ 20,000
	( To write off patent off the books)