Prepare journal entries to record the given transactions and events.

Explanation of Solution
Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolescence.
Prepare
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
January 1, Year 1 | Equipment (1) | 300,600 | |
Cash | 300,600 | ||
(To record the costs of loader) |
Table (1)
Working Note:
Calculate the costs of loader.
- Equipment is an asset account and it is increased. Therefore debit equipment account.
- Cash is an asset account and it is decreased. Therefore credit cash account.
Prepare journal entry to record the betterment of the loader as follows:
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
January 3, Year 1 | Equipment | 4,800 | |
Cash | 4,800 | ||
(To record the betterment of loader) |
Table (2)
- Equipment is an asset account and it is increased. Therefore debit equipment account.
- Cash is an asset account and it is decreased. Therefore credit cash account.
Prepare journal entry to record the depreciation expense as follows:
Date | Account title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
December 31, Year 1 | Depreciation expense (3) | 70,850 | ||
| 70,850 | |||
(To record the depreciation expense) |
Table (3)
Working Note:
Calculate the depreciable cost:
Amount ($) | |
Total original cost | 300,600 |
Add: Cost of betterment | 4,800 |
Revised cost of equipment | 305,400 |
Less: Revised salvage | 22,000 |
Depreciable Cost | $283,400 |
Table (4)
…… (2)
Calculate the depreciation expense (for year 1) after January 3rd betterment:
- Depreciation expense is a component of
stockholder’s equity. It decreases the stockholder’s equity. Thus, depreciation expense is debited. - Accumulated depreciation is a contra asset which decreases the value of the asset. Increase in accumulated depreciation decreases the asset’s value. Thus, accumulated depreciation on equipment is credited.
Prepare journal entry to record the extraordinary repair on loader as follows:
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
January 1, Year 2 | Equipment | 5,400 | |
Cash | 5,400 | ||
(To record the extraordinary repair on loader) |
Table (5)
- Equipment is an asset account and it is increased. Therefore debit equipment account.
- Cash is an asset account and it is decreased. Therefore credit cash account.
Prepare journal entry to record the ordinary repair on the loader as follows:
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
February 17, Year 2 | Repairs expense–Equipment | 820 | |
Cash | 820 | ||
(To record the betterment of loader) |
Table (6)
- Repairs expenses are the components of the stockholder’s equity. An expense decreases the stockholder’s equity. Thus, repairs expenses account is debited.
- Cash is an asset account, and it is decreased. Thus, credit the cash account.
Prepare journal entry to record the depreciation expense as follows:
Date | Account title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
December 31, Year 2 | Depreciation expense (4) | 43,590 | ||
Accumulated depreciation | 43,590 | |||
(To record the depreciation expense) |
Table (7)
Working Note:
Calculate the depreciable cost.
Amount ($) | |
Total original cost | 310,800 |
Less: Accumulated depreciation | 70,850 |
Book value | 239,950 |
Less: Salvage | 22,000 |
Depreciable Cost | $217,950 |
Table (8)
…… (3)
Calculate the depreciation expense for the year 2 after January 1st extraordinary repair.
- Depreciation expense is a component of stockholder’s equity. It decreases the stockholder’s equity. Thus, depreciation expense is debited.
- Accumulated depreciation is a contra asset which decreases the value of the asset. Increase in accumulated depreciation decreases the asset’s value. Thus, accumulated depreciation on equipment is credited.
Want to see more full solutions like this?
Chapter 10 Solutions
Principles of Financial Accounting.
- Quick answer of this accounting questionsarrow_forwardBlockbuster Co is building a new state of the art cineplex at a cost of $3,500,000.They received a capital investment of $1,500,000. The remainder of funds will haveto be borrowed so they decided to issue bonds. They have issued 10.5%, 5-yearbonds. These bonds were issued on January 1st, 2020, and pay semi-annual intereston July 1st and January 1st. The bonds yield 10%. The year end is December 31st Calculate the proceeds from the sale of the bond. Clearly show theamount of the premium or discount and state two reasons which supportthe premium or discount calculatedarrow_forwardGeneral accounting questionarrow_forward
- Need help with this question solution general accountingarrow_forwardBlockbuster Co is building a new state of the art cineplex at a cost of $3,500,000.They received a capital investment of $1,500,000. The remainder of funds will haveto be borrowed so they decided to issue bonds. They have issued 10.5%, 5-yearbonds. These bonds were issued on January 1st, 2020, and pay semi-annual intereston July 1st and January 1st. The bonds yield 10%. The year end is December 31starrow_forwardHi expert please give me answer general accounting questionarrow_forward
- General Accountingarrow_forwardRequired Determine whether the following items included in Wong Company’s January Year 1 bank reconciliation will require adjusting or correcting entries on Wong’s books. When an entry is required, record it in general journal format. Note: If no entry is required for a transaction or event, select "No journal entry required" in the first account field. Service charges of $50 for the month of January were listed on the bank statement. The bank charged a $250 check drawn on Wing Restaurant to Wong’s account. The check was included in Wong’s bank statement. A check of $62 was returned to the bank because of insufficient funds and was noted on the bank statement. Wong received the check from a customer and thought it was good when it was deposited into the account. A $990 deposit was recorded by the bank as $980. Four checks totaling $810 written during the month of January were not included with the January bank statement. A $75 check written to OfficeMax for office supplies was…arrow_forwardTotal assets at the year end?arrow_forward
- Please give me true answer this financial accounting questionarrow_forwardcritically analyze the effectiveness of the tax system in Jamaica with a brief history of the tax system highlight the different types of taxes used in the country and identify and discuss 4 problems with the Jamaican tax system.arrow_forwardSolve my problemarrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub

