
Concept explainers
Prepare journal entries to record the given transactions and events.

Explanation of Solution
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
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 journal entry to record the cost of the loader as follows:
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
January 1, 2014 | Equipment | 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, 2014 | 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 (In $) |
Credit (In $) |
December 31, 2014 | Depreciation expense | 70,850 | ||
| 70,850 | |||
(To record the depreciation expense) |
Table (3)
Working Note:
Calculate the depreciable cost.
Amount (In $) | |
Total original cost | 300,600 |
Cost of betterment | 4,800 |
Revised cost of equipment | 305,400 |
Less: Revised salvage | 22,000 |
Depreciable Cost | $283,400 |
Table (4)
Calculate the depreciation expense for the year 2014 after January 3rd betterment.
- Depreciation expense is a component of
retained earnings . It decreases the retained earnings. Thus, depreciation expense is debited. - Accumulated depreciation is a contra asset which decreases the value of the asset. Increase in accumulated depreciation decreases the asset’s value. Thus, accumulated depreciation on equipment is credited.
Prepare journal entry to record the extraordinary repair on loader as follows:
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
January 1, 2015 | Equipment | 5,400 | |
Cash | 5,400 | ||
(To record the extraordinary repair on loader) |
Table (5)
- Equipment is an asset account and it is increased. Therefore debit equipment account.
- Cash is an asset account and it is decreased. Therefore credit cash account.
Prepare journal entry to record the ordinary repair on the loader as follows:
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
February 17, 2015 | 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 (In $) |
Credit (In $) |
December 31, 2015 | Depreciation expense | 43,590 | ||
Accumulated depreciation | 43,590 | |||
(To record the depreciation expense) |
Table (7)
Working Note:
Calculate the depreciable cost.
Amount (In $) | |
Total original cost | 310,800 |
Less: Accumulated depreciation | 70,850 |
Book value | 239,950 |
Less: Salvage | 22,000 |
Depreciable Cost | $217,950 |
Table (8)
Calculate the depreciation expense for the year 2015 after January 1st extraordinary repair.
- Depreciation expense is a component of retained earnings. It decreases the retained earnings. 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 8 Solutions
Financial Accounting Fundamentals:
- A stock is expected to pay a dividend of $2.75 at the end of the year and it should continue to grow at a constant rate of 5% a year. If its required return is 15%, what is the stock’s expected price 3 years from now? Carnes Cosmetics Co.’s stock price is $30, and it recently paid a dividend of $1.00. This dividend is expected to grow by 30% for the next three years, then grow forever at a constant rate of g%. If the company’s required rate of return is 9%, at what constant rate is the stock expected to grow after three years? Foodpanda is expected to pay the following dividends over the next four years: $5, $7, $3.75, and $4.26. Afterwards, the company pledges to maintain a constant 4.25% growth in dividends forever. If the required return on the stock is 9%, what is the current share price? Cardinal Corporation just paid a dividend of $15. However, the management expects to reduce the payout by 2% per year, indefinitely. If you require a return of 10% on this stock, how…arrow_forwardCalculate the amount of interest provide answerarrow_forwardAbcarrow_forward
- What is its accounts receivable turnover for the period?arrow_forwardWhat are annual credit sales ?arrow_forwardIf beginning and ending work in process inventories are $9,100 and $18,100, respectively, and cost of goods manufactured is $183,000, what is the total manufacturing cost for the period? Need helparrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





