Highsmith Rental Company purchased an apartment building early in 2013. There ar
ID: 2772540 • Letter: H
Question
Highsmith Rental Company purchased an apartment building early in 2013. There are 25 apartments in the building and each is furnished with major kitchen appliances. The company has decided to use the group depreciation method for the appliances. The following data are available:
4
In 2016, two new refrigerators costing $3,000 were purchased for cash. The old refrigerators, which originally cost $2,100, were sold for $500.
Calculate the group depreciation rate, group life, and depreciation for 2013. (Round the Group depreciation rate to 1 decimal place and Group life to 2 decimal places.)
Prepare the journal entries to record the purchase of the new refrigerators and the sale of the old refrigerators. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)
Appliance Cost Residual Value Service Life
(in Years) Stoves $ 21,000 $ 3,000 6 Refrigerators 16,000 4,000 5 Dishwashers 14,000 3,000
4
In 2016, two new refrigerators costing $3,000 were purchased for cash. The old refrigerators, which originally cost $2,100, were sold for $500.
Required: 1.Calculate the group depreciation rate, group life, and depreciation for 2013. (Round the Group depreciation rate to 1 decimal place and Group life to 2 decimal places.)
Group depreciation rate (#.#) % Group life (#.##) years Depreciation for 2013 (Straight Line) 2.
Prepare the journal entries to record the purchase of the new refrigerators and the sale of the old refrigerators. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)
Explanation / Answer
1
Appliance
Cost
Residual Value
Depreciable Cost
Service Life (Years)
Depreciation Per Year
A
B
C = A-B
D
C/D
Stoves
21000
3000
18000
6
3000
Old Refrigerators
16000
4000
12000
5
2400
Dishwashers
14000
3000
11000
4
2750
Total
51000
41000
8150
Group Depreciation Rate :
= Total depreciation per year / Total original cost
= 8150 / 51000
16.0%
Group life
= Total depreciable cost / Total depreciation per year
= 41800 / 8150
5.13
Years
Depreciation for 2013
= $8150
2
Journal entries:
Account / Explanations
Debit
Credit
Refrigerators
$ 3,000
Cash
$ 3,000
(two new refrigerators costing $3,000 purchased for cash)
Cash
$ 500
Accumulated Depreciation (2100*16%)*3 Years
$ 1,008
Loss on Sale (2100-500-1008)
$ 592
Refrigerators
$ 2,100
(Being refrigerators sold for cash )
1
Appliance
Cost
Residual Value
Depreciable Cost
Service Life (Years)
Depreciation Per Year
A
B
C = A-B
D
C/D
Stoves
21000
3000
18000
6
3000
Old Refrigerators
16000
4000
12000
5
2400
Dishwashers
14000
3000
11000
4
2750
Total
51000
41000
8150
Group Depreciation Rate :
= Total depreciation per year / Total original cost
= 8150 / 51000
16.0%
Group life
= Total depreciable cost / Total depreciation per year
= 41800 / 8150
5.13
Years
Depreciation for 2013
= $8150
2
Journal entries:
Account / Explanations
Debit
Credit
Refrigerators
$ 3,000
Cash
$ 3,000
(two new refrigerators costing $3,000 purchased for cash)
Cash
$ 500
Accumulated Depreciation (2100*16%)*3 Years
$ 1,008
Loss on Sale (2100-500-1008)
$ 592
Refrigerators
$ 2,100
(Being refrigerators sold for cash )
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