Daltry Company has a December 31 year-end. Part a) Daltry purchased the following assets on January 1, Year 1: Purchased equipment for $84,000. This equipment is expected to be in service for 5 years, and the residual value of $24,000. Daltry will depreciate this equipment using the double declining balance method. Purchased a building for $460,000. It will be depreciated over 20 years using the straight-line method and have a residual value of $160,000. Purchased an ocean-going tugboat for $850,000. It is expected to provide 100,000 hours of service over its useful life and have a residual value of $120,000. It will be depreciated using the units of production method. In Year 1 it was used for 4,380 hours. Instructions: Prepare the three December 31 adjusting journal entries for these assets. Part b) Partial year depreciation: For partial year depreciation, Daltry rounds to the nearest month, except for items using units of production. Assume that instead of purchasing these assets on January 1, they were purchased as follows: Equipment: March 18 Building: September 10 Tug boat: October 22: From date of purchase to year end it was used 910 hours. In year 2 the tugboat was used 3,900 hours. Instructions: Prepare the three December 31 adjusting journal entries for these assets for both Year 1 and Year 2. Do all three Year 1 entries and then the Year 2 entries. Remember to use standard journal entry format.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Question 1.
Daltry Company has a December 31 year-end.
Part a) Daltry purchased the following assets on January 1, Year 1:
-
Purchased equipment for $84,000. This equipment is expected to be in service for 5 years, and the residual value of $24,000. Daltry will
depreciate this equipment using the double declining balance method. -
Purchased a building for $460,000. It will be depreciated over 20 years using the straight-line method and have a residual value of $160,000.
-
Purchased an ocean-going tugboat for $850,000. It is expected to provide 100,000 hours of service over its useful life and have a residual value of $120,000. It will be depreciated using the
units of production method . In Year 1 it was used for 4,380 hours.
Instructions:
Prepare the three December 31
Part b) Partial year depreciation:
For partial year depreciation, Daltry rounds to the nearest month, except for items using units of production. Assume that instead of purchasing these assets on January 1, they were purchased as follows:
-
Equipment: March 18
Building: September 10
Tug boat: October 22: From date of purchase to year end it was used 910 hours. In year 2 the tugboat was used 3,900 hours.
Instructions:
Prepare the three December 31 adjusting journal entries for these assets for both Year 1 and Year 2. Do all three Year 1 entries and then the Year 2 entries.
Remember to use standard
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