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 and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents. January 2, 2020 Paid $103,000 cash to purchase storage shed components. January 3, 2020 Paid $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, 2020 Paid $49,000 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, 2020 Paid $700 cash for minor repairs to the pickup truck's upholstery. July 1, 2020 Paid $12,000 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, 2020 Recorded depreciation and amortization on the pickup truck, storage shed, and patent. June 30, 2021 Sold the pickup truck for $42,000 cash. (Record the depreciation on the truck prior to recording its disposal.) December 31, 2021 Recorded depreciation on the storage shed. Recorded the patent amortization. After recording the patent amortization, determined that the patent was impaired and wrote off its remaining book value (i.e., wrote down the book value to zero). 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.)
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 and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents. January 2, 2020 Paid $103,000 cash to purchase storage shed components. January 3, 2020 Paid $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, 2020 Paid $49,000 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, 2020 Paid $700 cash for minor repairs to the pickup truck's upholstery. July 1, 2020 Paid $12,000 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, 2020 Recorded depreciation and amortization on the pickup truck, storage shed, and patent. June 30, 2021 Sold the pickup truck for $42,000 cash. (Record the depreciation on the truck prior to recording its disposal.) December 31, 2021 Recorded depreciation on the storage shed. Recorded the patent amortization. After recording the patent amortization, determined that the patent was impaired and wrote off its remaining book value (i.e., wrote down the book value to zero). 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.)
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
Transcribed Image Text: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 and other vehicles, double-declining-balance depreciation for
buildings, and straight-line amortization for patents.
January 2, 2020 Paid $103,000 cash to purchase storage shed components.
January 3, 2020 Paid $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, 2020 Paid $49,000 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, 2020 Paid $700 cash for minor repairs to the pickup truck's upholstery.
July 1, 2020 Paid $12,000 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, 2020 Recorded depreciation and amortization on the pickup truck, storage shed, and patent.
June 30, 2021 Sold the pickup truck for $42,000 cash. (Record the depreciation on the truck prior to recording its
disposal.)
December 31, 2021 Recorded depreciation on the storage shed. Recorded the patent amortization. After recording the
patent amortization, determined that the patent was impaired and wrote off its remaining book value
(i.e., wrote down the book value to zero).
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.)
Transcribed Image Text:View transaction list
View journal entry worksheet
No
Date
General Journal
Debit
Credit
1 January 02, 2020 Buildings
103,000
Cash
103,000
January 03, 2020 Buildings
3,000
Cash
3,000
3
April 01, 2020
Truck
49,000
Cash
49,000
4
May 13, 2020
Repairs and Maintenance Expense
700
Cash
700
July 01, 2020
Patents
12,000
Cash
12,000
December 31,
2020
Depreciation Expense
6
Amortization Expense
Accumulated Depreciation-Buildings
Accumulated Depreciation-Truck
Accumulated Amortization
7
June 30, 2021
Depreciation Expense
Accumulated Depreciation-Truck
8
June 30, 2021
Cash
Accumulated Depreciation-Truck
Truck
Gain on Disposal of PPE
December 31,
2021
Depreciation Expense
9
Accumulated Depreciation-Buildings
December 31,
2021
10
Amortization Expense
Accumulated Amortization
December 31,
11
Accumulated Amortization
2021
Patents
December 31,
2021
12
Impairment Loss
Patents
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