The following transactions and adjusting entries were completed by a paper-packaging company called Gravure Graphics International. The company uses straight-line depreciation for trucks, buildings, and other vehicles, and straight-line amortization for patents. January 2, 2020Paid $92,000 cash to purchase storage shed components.January 3, 2020Paid $3,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $6,000.April 1, 2020Paid $35,000 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 $4,000. This vehicle is to be recorded in the Truck account.May 13, 2020Paid $500 cash for minor repairs to the pickup truck's upholstery.July 1, 2020Paid $23,000 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.December 31, 2020Recorded depreciation and amortization on the pickup truck, storage shed, and patent. June 30, 2021Sold the pickup truck for $30,000 cash. (Record the depreciation on the truck prior to recording its disposal.)December 31, 2021Recorded depreciation on the storage shed. Recorded the patent amortization. After recording the patent amortization, determined that the patent was not impaired. Required: 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.) Please don't provide solution in an image format thank you
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.
The following transactions and
January 2, 2020Paid $92,000 cash to purchase storage shed components.January 3, 2020Paid $3,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $6,000.April 1, 2020Paid $35,000 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 $4,000. This vehicle is to be recorded in the Truck account.May 13, 2020Paid $500 cash for minor repairs to the pickup truck's upholstery.July 1, 2020Paid $23,000 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.December 31, 2020Recorded depreciation and amortization on the pickup truck, storage shed, and patent.
June 30, 2021Sold the pickup truck for $30,000 cash. (Record the depreciation on the truck prior to recording its disposal.)December 31, 2021Recorded depreciation on the storage shed. Recorded the patent amortization. After recording the patent amortization, determined that the patent was not impaired.
Required:
Prepare the journal entries required on each of the above dates. (If no entry is required for a transaction/event, select "No
Please don't provide solution in an image format thank you
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