The following transactions and adjusting entries were completed by a paper-packa
ID: 2561959 • Letter: T
Question
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.
Paid $100,000 cash to purchase storage shed components.
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 $8,000.
Paid $46,000 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 $6,000.
Paid $15,000 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.
Recorded depreciation and amortization on the pickup truck, storage shed, and patent.
Sold the pickup truck for $39,000 cash. (Record the depreciation on the truck prior to recording its disposal.)
Recorded depreciation on the storage shed. Determined that the patent was impaired and wrote off its remaining book value (i.e., wrote down the book value to zero).
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 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.
Explanation / Answer
Journal Entries
Debit Credit
Jan 2 Building/Storage Shed 100,000
Cash 100,000
(To Record Purchase of storage shed for Cash)
Jan 3 Building / Storage Shed 5,000
Cash 5,000
( To Record erecting of Shed for cash)
April 1 Truck 46,000
Cash 46,000
( To Record purchase of truck for cash)
May 13 Repairs 400
Cash 400
( To Record repairs to truck)
July 1 Patents 15,000
Cash 15,000
( To Record purchase of Patents for cash)
Dec 31 Depreciation 28,500
Building/Storage Shed 21,000
Truck 6,000
Patents 1,500
(To Record Depreciation at year end as under:
Building : (100,000+5,000) *2/10=21,000
Truck : (46,000-6,000)/5=8,000*9/12=6,000
Patents : 15,000/5=3,000/2=1,500
2016
Jun 30 Depreciation 4,000
Truck 4,000
(Depreciation on truck for half year)
June 30 Cash 39,000
Truck 36,000
Profit on sale of truck 3,000
(To Record sales of truck and difference in depreciated value and sales price credited to Profit on sale)
Dec 31 Depreciation 16,800
Building / Storage Shed 16,800
(Depreciation on Building :(105,000-21000)*2/10
Dec 31 Impairment Loss on Patent 13,500
Patent 13,500
(Patent impaired and book value written down to zero)
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