Question

Manrow Growers, Inc., owns equipment for sowing and harvesting its organic fruit, vegetables, and tree nuts that are sold to local restaurants and grocery stores. At the beginning of 2016, an asset account for the company showed the following balances:

Equipment.............................................  $35,000

Accumulated depreciation through 2015.........  132,000

During 2016, the following expenditures were incurred for the equipment:

 

Routine maintenance and repairs on the equipment...................................     $ 5,000

Major overhaul of the equipment that improved efficiency on January 1, 2016...   42,000

The equipment is being depreciated on a straight-line basis over an estimated life of 10 years with a $20,000 estimated residual value. The annual accounting period ends on December 31.

Required:

1. Give the adjusting entry that was made at the end of 2015 for depreciation on the equipment.

2. Starting at the beginning of 2016, what is the remaining estimated life?

3. Give the journal entries to record the two expenditures during 2016.

Answer 1

The Adiusting Tournal Entries are as follows: Account Title Debit S Credit S 1) iation 33000 (350000-20000)/10 Accumulated iation 33000 (record depreciation for the year) 3) Repairs & Maiantenance Ex 5000 Cash 5000 (record and expense of equipment) uipment Cash 42000 42000 (record overhaul of ment for improving efficiency) 2) Remianing Estimated life Total life Number of years equipment used 10 -(132000/33000) - 10 4 = 6 Years