On April 1, 2022, the KB Toy Company purchased equipment to be used in its manufacturing process. The equipment cost $59,200, has an eight-year useful life, and has no residual value. The company uses the straight-line depreciation method for all manufacturing equipment. On January 4, 2024, $16,150 was spent to repair the equipment and to add a feature that increased its operating efficiency. Of the total expenditure. $3,000 represented ordinary repairs and annual maintenance and $13,150 represented the cost of the new feature. In addition to increasing operating efficiency, the total useful life of the equipment was extended to 10 years. Required: 1. Prepare journal entries for the depreciation for 2022 and 2023. 2. Prepare journal entry for the 2024 expenditure. [Any capitalized amounts are recorded using Alternative 2-capitalization of new cost]. 3. Prepare journal entry for the depreciation for 2024.

On April 1, 2022, the KB Toy Company purchased equipment to be used in its manufacturing process. The equipment cost $59,200, has an eight-year useful life, and has no residual value. The company uses the straight-line depreciation method for all manufacturing equipment. On January 4, 2024, $16,150 was spent to repair the equipment and to add a feature that increased its operating efficiency. Of the total expenditure. $3,000 represented ordinary repairs and annual maintenance and $13,150 represented the cost of the new feature. In addition to increasing operating efficiency, the total useful life of the equipment was extended to 10 years. Required: 1. Prepare journal entries for the depreciation for 2022 and 2023. 2. Prepare journal entry for the 2024 expenditure. [Any capitalized amounts are recorded using Alternative 2-capitalization of new cost]. 3. Prepare journal entry for the depreciation for 2024.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

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Question

On April 1, 2022, the KB Toy Company purchased equipment to be used in its manufacturing process. The equipment cost
$59,200, has an eight-year useful life, and has no residual value. The company uses the straight-line depreciation method for
all manufacturing equipment.
On January 4, 2024, $16,150 was spent to repair the equipment and to add a feature that increased its operating efficiency. Of
the total expenditure, $3,000 represented ordinary repairs and annual maintenance and $13,150 represented the cost of the
new feature. In addition to increasing operating efficiency, the total useful life of the equipment was extended to 10 years.
Required:
1. Prepare journal entries for the depreciation for 2022 and 2023.
2. Prepare journal entry for the 2024 expenditure. [Any capitalized amounts are recorded using Alternative 2-capitalization
of new cost].
3. Prepare journal entry for the depreciation for 2024.

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Step 3: 1. Journal entries for the depreciation for 2022 and 2023

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