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 $85,000 cash to purchase storage shed components. January 3, 2020 Paid $5,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 year and a residual value of $8,000. April 1, 2020 May 13, 2020 July 1, 2020 December 31, 2020 June 30, 2021 December 31, 2021 Paid $41,000 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 $6,000. This vehicle is to be recorded in the Truck account. Paid $600 cash for minor repairs to the pickup truck's upholstery. Paid $30,000 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. Recorded depreciation and amortization on the pickup truck, storage shed, and patent. Sold the pickup truck for $35,000 cash. (Record the depreciation on the truck prior to recording its disposal.). Recorded depreciation on the storage shed. Recorded the patent amortization. After recording the patent amortization, determined that the patent was impaired nd 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 $85,000 cash to purchase storage shed components. January 3, 2020 Paid $5,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 year and a residual value of $8,000. April 1, 2020 May 13, 2020 July 1, 2020 December 31, 2020 June 30, 2021 December 31, 2021 Paid $41,000 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 $6,000. This vehicle is to be recorded in the Truck account. Paid $600 cash for minor repairs to the pickup truck's upholstery. Paid $30,000 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. Recorded depreciation and amortization on the pickup truck, storage shed, and patent. Sold the pickup truck for $35,000 cash. (Record the depreciation on the truck prior to recording its disposal.). Recorded depreciation on the storage shed. Recorded the patent amortization. After recording the patent amortization, determined that the patent was impaired nd 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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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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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 $85,000 cash to purchase storage shed components.
January 3, 2020 Paid $5,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years
and a residual value of $8,000.
April 1, 2020
May 13, 2020
July 1, 2020
December 31, 2020
Paid $41,000 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 $6,000. This vehicle is to be recorded in the Truck
account.
Paid $600 cash for minor repairs to the pickup truck's upholstery.
Paid $30,000 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.
Recorded depreciation and amortization on the pickup truck, storage shed, and patent.
June 30, 2021 Sold the pickup truck for $35,000 cash. (Record the depreciation on the truck prior to recording its
disposal.).
Recorded depreciation on the storage shed. Recorded the patent amortization. After recording the
December 31, 2021
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.)
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