PA9-4 Recording Transactions and Adjustments for Tangible and Intangible Assets
ID: 2555102 • Letter: P
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 2015 and 2016. The company uses straight-line depreciation for trucks and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents. 2, 2015 3,2015 Paid S88,000 cash to purchase storage shed components Paid S4,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $7,000 January January April May 1, 2015 Paid 531,000 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 S5,000 Pald S300 cash for repairs to the pickup truck 13, 2015 1, 2015 Paid $27,000 cash to purchase patent rights on a new paper bag manufacturing July December 31,2015 Recorded depreciation and amortization on the pickup truck, storage shed, and June 30, 2016 Sold the pickup truck for $26,000 cash. (Record the depreciation on the truck prior December 31,2016 Recorded depreclation on the storage shed. Determined that the patent was The patent is estimated to have a remaining useful life of five years. process. patent to recording its disposal.) impaired and wrote off its remaining book value (i.e., wrote down the book value to Required: Prepare the journal entries required on each of the above dates. (If no entry is required for a transactionlevent, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. January 02. Buildings 88,000 2015 Cash 88,000 January 0 Buildings 4,000 2015 Cash 4,000 April 01, 2015 Equipment 31,000 Cash 31,000 May 13, 2015 Repairs and Maintenance Expense 300 Cash 300 uly 01, 2015 Patent 27,000 Cash 27,000 r31. Depreciation Expense 2015 Amortization Expense Accumulated Depreciation-Equipment atent Depreciation Expense 2016 Cash 26,000 Equipment Gain on Disposal Decemb Depreciation Expense 2016 ildin 31. Impaiment Loss 2016 PatentExplanation / Answer
Answer: Date Account title and explanation Debit Credit 2015 2-Jan Building $ 88,000.00 Cash $ 88,000.00 (To record purchase of storage shed component) 3-Jan Building $ 4,000.00 Cash $ 4,000.00 (To record errection of storage shed) 1-Apr Equipment $ 31,000.00 Cash $ 31,000.00 (To record purchase of equipment) 13-May Repair and maintenance Expense $ 300.00 Cash $ 300.00 (To record repair of equipment) 1-Jul Patent $ 27,000.00 Cash $ 27,000.00 (To record purchase of patent) 31-Dec Depreciation Expense $ 22,300.00 Amortization Expense $ 2,700.00 Accmulated depreciation-Building $ 18,400.00 ((88000+4000)/10*200%) Accumulated Depreciation-Equipment $ 3,900.00 (($31,000-$5,000)/5 years*9 months/12 months) Accumulated Depreciation-Patent $ 2,700.00 ($27,000/5 years*6 months/12 months) 2016 30-Jun Depreciation Expense $ 2,600.00 Accumulated Depreciation-Equipment $ 2,600.00 (($31,000-$5,000)/5 years*6 months/12 months) (To record depreciation on equipment for 6 months) 30-Jun Cash $ 26,000.00 Accmulated Depreciation-Equipment $ 6,500.00 (3900+2600) Equipment $ 31,000.00 Gain on Disposal $ 1,500.00 (26,000+6,500-31,000) (To record sale of Equipment) 31-Dec Impairment Loss $ 24,300.00 ($27,000-2,700) Patent $ 24,300.00 (To record impairment of loss on patent)
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