PB9-4 Recording Transactions and Adjustments for Tangible and Intangible Assets
ID: 2529399 • Letter: P
Question
PB9-4 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 local delivery company called Fast Delivery. The company uses straight-line depreciation for delivery vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for franchise rights.
Paid $165,000 cash to purchase a small warehouse building near the airport. The building has an estimated life of 20 years and a residual value of $3,500.
Paid $43,000 cash to purchase a delivery van. The van has an estimated useful life of five years and a residual value of $8,600.
Paid $500 cash to paint a small office in the warehouse building.
Paid $105,000 cash to UPS to begin operating Fast Delivery business as a franchise using the name The UPS Store. This franchise right expires in five years.
Recorded depreciation and amortization on the delivery van, warehouse building, and franchise right.
Sold the warehouse building for $132,000 cash. (Record the depreciation on the building prior to recording its disposal.)
Recorded depreciation on the delivery van and amortization on the franchise right. Determined that the franchise right was not impaired in value.
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.)
The following transactions and adjusting entries were completed by a local delivery company called Fast Delivery. The company uses straight-line depreciation for delivery vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for franchise rights.
PB9-4 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 local delivery company called Fast Delivery. The company uses straight-line depreciation for delivery vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for franchise rights. January 2,2015 Paid $165,000 cash to purchase a small warehouse building near the airport. The building has an estimated life of 20 years and a residual value of S3,500. Paid S43,000 cash to purchase a delivery van. The van has an estimated useful life of five years and a residual value of $8,600. Paid $500 cash to paint a small office in the warehouse building. Paid S100 cash to get the oil changed in the delivery van. Paid S105,000 cash to UPS to begin operating Fast Delivery business as a franchise using the name The UPS Store. This franchise right expires in five years Recorded depreciation and amortization on the delivery van, warehouse building, and franchise right. Sold the warehouse building for $132,000 cash. (Record the depreciation on the building prior to recording its disposal.) Recorded depreciation on the delivery van and amortization on the franchise right. July 1,2015 October 2,2015 October 13, 2015 December 1, 2015 December 31, 2015 June 30, 2016 December 31, 2016 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.)Explanation / Answer
2 Jan:
Debit: Warehouse 165,000
Credit: Cash / Bank 165,000
1 July:
Debit: Delivery Van 43,000
Credit: Cash / Bank 43,000
2 October:
Debit: Rep and maint - Office 500
Credit: Cash / Bank 500
13 Oct:
Debit: Rep and maint - Vehicle 100
Credit: Cash / Bank 100
1 Dec:
Debit: Franchisee Rights 105,000
Credit: Cash Bank 105,000
31 Dec 2015:
Debit: Dep on Building (Warehouse) = (165,000 -3500) x 2/20 = 16,150
Debit: Dep on vehicle = (43000 - 8600) x 6/12 x 1/5 = 3,440
Debit: Amortization on Franchise = (105,000 x 1/12 x 1/5) = 1.750
Credit: Acc depreciation buildings 16,150
Credit: Accumulated dep Vehicle : 3440
Credit: Accumulated amortizations : 3440
30 June 16:
Debit: Depreciation on building = (165,000 -3500) x 2/20 x 6/12 = 8,075
Credit: Acc depreciation on buildings = 8075
Debit: Cash / Bank 132,000
Debit: Acc depreciation on buildings = (16150 + 8075) = 24,225
Debit: Loss on sale of asset = (165,000 - 132,000 - 24,225) = 8,775
Credit: Warehouse 165,000
31 Dec 2016:
Debit: Dep on vehicle = (43000 - 8600) x 1/5 = 6,880
Debit: Amortization on Franchise = (105,000 x 1/5) = 21000
Credit: Accumulated dep Vehicle : 6880
Credit: Accumulated amortizations : 21000
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