Journal Entries : Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order. Accounting rules for journal entries : To increase balance of the account : Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account : Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. To Prepare : Journal Entries.

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Answer 1

Question

Chapter 8, Problem 4PSA

To determine

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To Prepare: Journal Entries.

Expert Solution & Answer

Explanation of Solution

To record the entry for improvement made in equipment on Jan 1 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1,2016	Equipment		300,600
	Cash			300,600
	(To record the cash purchases)

Table (1)

Equipment is an asset account. Equipment account increases as the new equipment is bought to the business, hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Working notes:

Computation of the total cost:

Total Cost=Purchase Price of Asset+Sales tax+Transportation charges=$287,600+$11,500+$1,500=$300,600

The total cost of the equipment is $300,600.

Record Betterment of loader on Jan 3 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 3,2016	Equipment		4,800
	Cash			4,800
	(To record the betterment of loader)

Table (2)

Equipment is an asset account. Equipment account increases as the betterment of loader will be added to the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2016	Depreciation		70,850
	Accumulated Depreciation			70,850
	(To record the depreciation)

Table (3)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of total salvage value:

Total Salvage value=Salvage value of Equipment+Salvage value of loader=$20,600+$1,400=$22,000

Total Salvage value is $22,000.

Computation of the amount to be depreciated:

Cost to be depreciated=(Actual cost+Loader cost)−Total salvage value=($300,600+$4,800)−$22,000=$305,400−$22,000=$283,400

Total Cost to be depreciated is $283,400.

Computation of Depreciation:

Depreciation=( Cost of the asset−Residual value)Useful life=$283,4004=$70,850

Hence, the depreciation that will be charged in 2016 is $70,850.

2017

Record the entry for improvement of equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1, 2017	Equipment		5,400
	Cash			5,400
	(To record the Improvement in equipment)

Table (4)

Equipment is an asset account. Equipment account increases as the improvement in equipment increases the useful life of the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record the entry for repairs.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 17, 2017	Repairs on Equipment		820
	Cash			820
	(To record the repairs)

Table (5)

Repairs on equipment are an expense account. Repairs account increases as the expenses have been made to the equipment and it is debited as all the expenses and losses are debited according to the accounting rule.
Cash account is an asset account. Cash account decreases as the amount of repairs are paid in cash, hence the asset decreases and all the assets are credited as their value decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2017	Depreciation		43,590
	Accumulated Depreciation			43,590
	(To record the depreciation)

Table (6)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of actual cost of the asset at the end of 2017:

Actual cost=(Cost of the asset−Depreciation in 2016)+Improvement cost=($283,400−$70,850)+$5,400=$212,500+$5,400=$217,950

Actual cost of the asset at the end of 2017 is $217,950.

Computation of total expected life of the asset:

Expected life=Original life−Years used+Increase in life=4 years−1 year+2 years=5 years

Expected Life of equipment is 5 years.

Computation of depreciation in 2017:

Depreciation=( Cost of the asset−Residual value)Useful life=$217,9505=$43,590

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Capital Expenditures and Revenue Expenditures Quality Move Company made the following expenditures on one of its delivery trucks: Mar. 20. Replaced the transmission at a cost of $4,135. June 11. Paid $1,770 for installation of a hydraulic lift. Nov. 30. Paid $73 to change the oil and air filter. Prepare the journal entries for each expenditure. Mar. 20 fill in the blank 2 fill in the blank 4 June 11 fill in the blank 6 fill in the blank 8 Nov. 30 fill in the blank 10 fill in the blank 12

Year 1 January 1 Paid $294,000 cash plus $11,760 in sales tax and $1,700 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $29,400 salvage value. Loader costs are recorded in the Equipment account. January 3 Paid $6,000 to install air conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $1,800. December 31 Recorded annual straight-line depreciation on the loader. Year 2 January 1 Paid $4,800 to overhaul the loader's engine, which increased the loader's estimated useful life by two years. February 17 Paid $1,200 for minor repairs to the loader after the operator backed it into a tree. December 31 Recorded annual straight-line depreciation on the loader. Required: Prepare journal entries to record these transactions and events. View transaction list Journal entry worksheet 1 2 3 4 5 6 Paid $294,000 cash plus $11,760 in sales tax and $1,700…

Answer 2

Question

Chapter 8, Problem 4PSA

To determine

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To Prepare: Journal Entries.

Expert Solution & Answer

Explanation of Solution

To record the entry for improvement made in equipment on Jan 1 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1,2016	Equipment		300,600
	Cash			300,600
	(To record the cash purchases)

Table (1)

Equipment is an asset account. Equipment account increases as the new equipment is bought to the business, hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Working notes:

Computation of the total cost:

Total Cost=Purchase Price of Asset+Sales tax+Transportation charges=$287,600+$11,500+$1,500=$300,600

The total cost of the equipment is $300,600.

Record Betterment of loader on Jan 3 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 3,2016	Equipment		4,800
	Cash			4,800
	(To record the betterment of loader)

Table (2)

Equipment is an asset account. Equipment account increases as the betterment of loader will be added to the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2016	Depreciation		70,850
	Accumulated Depreciation			70,850
	(To record the depreciation)

Table (3)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of total salvage value:

Total Salvage value=Salvage value of Equipment+Salvage value of loader=$20,600+$1,400=$22,000

Total Salvage value is $22,000.

Computation of the amount to be depreciated:

Cost to be depreciated=(Actual cost+Loader cost)−Total salvage value=($300,600+$4,800)−$22,000=$305,400−$22,000=$283,400

Total Cost to be depreciated is $283,400.

Computation of Depreciation:

Depreciation=( Cost of the asset−Residual value)Useful life=$283,4004=$70,850

Hence, the depreciation that will be charged in 2016 is $70,850.

2017

Record the entry for improvement of equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1, 2017	Equipment		5,400
	Cash			5,400
	(To record the Improvement in equipment)

Table (4)

Equipment is an asset account. Equipment account increases as the improvement in equipment increases the useful life of the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record the entry for repairs.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 17, 2017	Repairs on Equipment		820
	Cash			820
	(To record the repairs)

Table (5)

Repairs on equipment are an expense account. Repairs account increases as the expenses have been made to the equipment and it is debited as all the expenses and losses are debited according to the accounting rule.
Cash account is an asset account. Cash account decreases as the amount of repairs are paid in cash, hence the asset decreases and all the assets are credited as their value decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2017	Depreciation		43,590
	Accumulated Depreciation			43,590
	(To record the depreciation)

Table (6)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of actual cost of the asset at the end of 2017:

Actual cost=(Cost of the asset−Depreciation in 2016)+Improvement cost=($283,400−$70,850)+$5,400=$212,500+$5,400=$217,950

Actual cost of the asset at the end of 2017 is $217,950.

Computation of total expected life of the asset:

Expected life=Original life−Years used+Increase in life=4 years−1 year+2 years=5 years

Expected Life of equipment is 5 years.

Computation of depreciation in 2017:

Depreciation=( Cost of the asset−Residual value)Useful life=$217,9505=$43,590

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Answer 3

Question

Chapter 8, Problem 4PSA

To determine

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To Prepare: Journal Entries.

Expert Solution & Answer

Explanation of Solution

To record the entry for improvement made in equipment on Jan 1 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1,2016	Equipment		300,600
	Cash			300,600
	(To record the cash purchases)

Table (1)

Equipment is an asset account. Equipment account increases as the new equipment is bought to the business, hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Working notes:

Computation of the total cost:

Total Cost=Purchase Price of Asset+Sales tax+Transportation charges=$287,600+$11,500+$1,500=$300,600

The total cost of the equipment is $300,600.

Record Betterment of loader on Jan 3 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 3,2016	Equipment		4,800
	Cash			4,800
	(To record the betterment of loader)

Table (2)

Equipment is an asset account. Equipment account increases as the betterment of loader will be added to the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2016	Depreciation		70,850
	Accumulated Depreciation			70,850
	(To record the depreciation)

Table (3)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of total salvage value:

Total Salvage value=Salvage value of Equipment+Salvage value of loader=$20,600+$1,400=$22,000

Total Salvage value is $22,000.

Computation of the amount to be depreciated:

Cost to be depreciated=(Actual cost+Loader cost)−Total salvage value=($300,600+$4,800)−$22,000=$305,400−$22,000=$283,400

Total Cost to be depreciated is $283,400.

Computation of Depreciation:

Depreciation=( Cost of the asset−Residual value)Useful life=$283,4004=$70,850

Hence, the depreciation that will be charged in 2016 is $70,850.

2017

Record the entry for improvement of equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1, 2017	Equipment		5,400
	Cash			5,400
	(To record the Improvement in equipment)

Table (4)

Equipment is an asset account. Equipment account increases as the improvement in equipment increases the useful life of the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record the entry for repairs.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 17, 2017	Repairs on Equipment		820
	Cash			820
	(To record the repairs)

Table (5)

Repairs on equipment are an expense account. Repairs account increases as the expenses have been made to the equipment and it is debited as all the expenses and losses are debited according to the accounting rule.
Cash account is an asset account. Cash account decreases as the amount of repairs are paid in cash, hence the asset decreases and all the assets are credited as their value decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2017	Depreciation		43,590
	Accumulated Depreciation			43,590
	(To record the depreciation)

Table (6)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of actual cost of the asset at the end of 2017:

Actual cost=(Cost of the asset−Depreciation in 2016)+Improvement cost=($283,400−$70,850)+$5,400=$212,500+$5,400=$217,950

Actual cost of the asset at the end of 2017 is $217,950.

Computation of total expected life of the asset:

Expected life=Original life−Years used+Increase in life=4 years−1 year+2 years=5 years

Expected Life of equipment is 5 years.

Computation of depreciation in 2017:

Depreciation=( Cost of the asset−Residual value)Useful life=$217,9505=$43,590

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Answer 4

Question

Chapter 8, Problem 4PSA

To determine

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To Prepare: Journal Entries.

Expert Solution & Answer

Explanation of Solution

To record the entry for improvement made in equipment on Jan 1 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1,2016	Equipment		300,600
	Cash			300,600
	(To record the cash purchases)

Table (1)

Equipment is an asset account. Equipment account increases as the new equipment is bought to the business, hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Working notes:

Computation of the total cost:

Total Cost=Purchase Price of Asset+Sales tax+Transportation charges=$287,600+$11,500+$1,500=$300,600

The total cost of the equipment is $300,600.

Record Betterment of loader on Jan 3 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 3,2016	Equipment		4,800
	Cash			4,800
	(To record the betterment of loader)

Table (2)

Equipment is an asset account. Equipment account increases as the betterment of loader will be added to the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2016	Depreciation		70,850
	Accumulated Depreciation			70,850
	(To record the depreciation)

Table (3)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of total salvage value:

Total Salvage value=Salvage value of Equipment+Salvage value of loader=$20,600+$1,400=$22,000

Total Salvage value is $22,000.

Computation of the amount to be depreciated:

Cost to be depreciated=(Actual cost+Loader cost)−Total salvage value=($300,600+$4,800)−$22,000=$305,400−$22,000=$283,400

Total Cost to be depreciated is $283,400.

Computation of Depreciation:

Depreciation=( Cost of the asset−Residual value)Useful life=$283,4004=$70,850

Hence, the depreciation that will be charged in 2016 is $70,850.

2017

Record the entry for improvement of equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1, 2017	Equipment		5,400
	Cash			5,400
	(To record the Improvement in equipment)

Table (4)

Equipment is an asset account. Equipment account increases as the improvement in equipment increases the useful life of the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record the entry for repairs.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 17, 2017	Repairs on Equipment		820
	Cash			820
	(To record the repairs)

Table (5)

Repairs on equipment are an expense account. Repairs account increases as the expenses have been made to the equipment and it is debited as all the expenses and losses are debited according to the accounting rule.
Cash account is an asset account. Cash account decreases as the amount of repairs are paid in cash, hence the asset decreases and all the assets are credited as their value decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2017	Depreciation		43,590
	Accumulated Depreciation			43,590
	(To record the depreciation)

Table (6)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of actual cost of the asset at the end of 2017:

Actual cost=(Cost of the asset−Depreciation in 2016)+Improvement cost=($283,400−$70,850)+$5,400=$212,500+$5,400=$217,950

Actual cost of the asset at the end of 2017 is $217,950.

Computation of total expected life of the asset:

Expected life=Original life−Years used+Increase in life=4 years−1 year+2 years=5 years

Expected Life of equipment is 5 years.

Computation of depreciation in 2017:

Depreciation=( Cost of the asset−Residual value)Useful life=$217,9505=$43,590

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Answer 5

Chapter 8, Problem 4PSA

To determine

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To Prepare: Journal Entries.

Expert Solution & Answer

Explanation of Solution

To record the entry for improvement made in equipment on Jan 1 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1,2016	Equipment		300,600
	Cash			300,600
	(To record the cash purchases)

Table (1)

Equipment is an asset account. Equipment account increases as the new equipment is bought to the business, hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Working notes:

Computation of the total cost:

Total Cost=Purchase Price of Asset+Sales tax+Transportation charges=$287,600+$11,500+$1,500=$300,600

The total cost of the equipment is $300,600.

Record Betterment of loader on Jan 3 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 3,2016	Equipment		4,800
	Cash			4,800
	(To record the betterment of loader)

Table (2)

Equipment is an asset account. Equipment account increases as the betterment of loader will be added to the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2016	Depreciation		70,850
	Accumulated Depreciation			70,850
	(To record the depreciation)

Table (3)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of total salvage value:

Total Salvage value=Salvage value of Equipment+Salvage value of loader=$20,600+$1,400=$22,000

Total Salvage value is $22,000.

Computation of the amount to be depreciated:

Cost to be depreciated=(Actual cost+Loader cost)−Total salvage value=($300,600+$4,800)−$22,000=$305,400−$22,000=$283,400

Total Cost to be depreciated is $283,400.

Computation of Depreciation:

Depreciation=( Cost of the asset−Residual value)Useful life=$283,4004=$70,850

Hence, the depreciation that will be charged in 2016 is $70,850.

2017

Record the entry for improvement of equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1, 2017	Equipment		5,400
	Cash			5,400
	(To record the Improvement in equipment)

Table (4)

Equipment is an asset account. Equipment account increases as the improvement in equipment increases the useful life of the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record the entry for repairs.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 17, 2017	Repairs on Equipment		820
	Cash			820
	(To record the repairs)

Table (5)

Repairs on equipment are an expense account. Repairs account increases as the expenses have been made to the equipment and it is debited as all the expenses and losses are debited according to the accounting rule.
Cash account is an asset account. Cash account decreases as the amount of repairs are paid in cash, hence the asset decreases and all the assets are credited as their value decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2017	Depreciation		43,590
	Accumulated Depreciation			43,590
	(To record the depreciation)

Table (6)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of actual cost of the asset at the end of 2017:

Actual cost=(Cost of the asset−Depreciation in 2016)+Improvement cost=($283,400−$70,850)+$5,400=$212,500+$5,400=$217,950

Actual cost of the asset at the end of 2017 is $217,950.

Computation of total expected life of the asset:

Expected life=Original life−Years used+Increase in life=4 years−1 year+2 years=5 years

Expected Life of equipment is 5 years.

Computation of depreciation in 2017:

Depreciation=( Cost of the asset−Residual value)Useful life=$217,9505=$43,590

Answer 6

Chapter 8, Problem 4PSA

To determine

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To Prepare: Journal Entries.

Expert Solution & Answer

Explanation of Solution

To record the entry for improvement made in equipment on Jan 1 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1,2016	Equipment		300,600
	Cash			300,600
	(To record the cash purchases)

Table (1)

Equipment is an asset account. Equipment account increases as the new equipment is bought to the business, hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Working notes:

Computation of the total cost:

Total Cost=Purchase Price of Asset+Sales tax+Transportation charges=$287,600+$11,500+$1,500=$300,600

The total cost of the equipment is $300,600.

Record Betterment of loader on Jan 3 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 3,2016	Equipment		4,800
	Cash			4,800
	(To record the betterment of loader)

Table (2)

Equipment is an asset account. Equipment account increases as the betterment of loader will be added to the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2016	Depreciation		70,850
	Accumulated Depreciation			70,850
	(To record the depreciation)

Table (3)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of total salvage value:

Total Salvage value=Salvage value of Equipment+Salvage value of loader=$20,600+$1,400=$22,000

Total Salvage value is $22,000.

Computation of the amount to be depreciated:

Cost to be depreciated=(Actual cost+Loader cost)−Total salvage value=($300,600+$4,800)−$22,000=$305,400−$22,000=$283,400

Total Cost to be depreciated is $283,400.

Computation of Depreciation:

Depreciation=( Cost of the asset−Residual value)Useful life=$283,4004=$70,850

Hence, the depreciation that will be charged in 2016 is $70,850.

2017

Record the entry for improvement of equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1, 2017	Equipment		5,400
	Cash			5,400
	(To record the Improvement in equipment)

Table (4)

Equipment is an asset account. Equipment account increases as the improvement in equipment increases the useful life of the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record the entry for repairs.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 17, 2017	Repairs on Equipment		820
	Cash			820
	(To record the repairs)

Table (5)

Repairs on equipment are an expense account. Repairs account increases as the expenses have been made to the equipment and it is debited as all the expenses and losses are debited according to the accounting rule.
Cash account is an asset account. Cash account decreases as the amount of repairs are paid in cash, hence the asset decreases and all the assets are credited as their value decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2017	Depreciation		43,590
	Accumulated Depreciation			43,590
	(To record the depreciation)

Table (6)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of actual cost of the asset at the end of 2017:

Actual cost=(Cost of the asset−Depreciation in 2016)+Improvement cost=($283,400−$70,850)+$5,400=$212,500+$5,400=$217,950

Actual cost of the asset at the end of 2017 is $217,950.

Computation of total expected life of the asset:

Expected life=Original life−Years used+Increase in life=4 years−1 year+2 years=5 years

Expected Life of equipment is 5 years.

Computation of depreciation in 2017:

Depreciation=( Cost of the asset−Residual value)Useful life=$217,9505=$43,590

Answer 7

Chapter 8, Problem 4PSA

To determine

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To Prepare: Journal Entries.

Answer 8

Expert Solution & Answer

Explanation of Solution

To record the entry for improvement made in equipment on Jan 1 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1,2016	Equipment		300,600
	Cash			300,600
	(To record the cash purchases)

Table (1)

Equipment is an asset account. Equipment account increases as the new equipment is bought to the business, hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Working notes:

Computation of the total cost:

Total Cost=Purchase Price of Asset+Sales tax+Transportation charges=$287,600+$11,500+$1,500=$300,600

The total cost of the equipment is $300,600.

Record Betterment of loader on Jan 3 2016.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 3,2016	Equipment		4,800
	Cash			4,800
	(To record the betterment of loader)

Table (2)

Equipment is an asset account. Equipment account increases as the betterment of loader will be added to the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2016	Depreciation		70,850
	Accumulated Depreciation			70,850
	(To record the depreciation)

Table (3)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of total salvage value:

Total Salvage value=Salvage value of Equipment+Salvage value of loader=$20,600+$1,400=$22,000

Total Salvage value is $22,000.

Computation of the amount to be depreciated:

Cost to be depreciated=(Actual cost+Loader cost)−Total salvage value=($300,600+$4,800)−$22,000=$305,400−$22,000=$283,400

Total Cost to be depreciated is $283,400.

Computation of Depreciation:

Depreciation=( Cost of the asset−Residual value)Useful life=$283,4004=$70,850

Hence, the depreciation that will be charged in 2016 is $70,850.

2017

Record the entry for improvement of equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1, 2017	Equipment		5,400
	Cash			5,400
	(To record the Improvement in equipment)

Table (4)

Equipment is an asset account. Equipment account increases as the improvement in equipment increases the useful life of the equipment; hence the asset increases and all the assets are debited as their values increases.
Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.

Record the entry for repairs.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 17, 2017	Repairs on Equipment		820
	Cash			820
	(To record the repairs)

Table (5)

Repairs on equipment are an expense account. Repairs account increases as the expenses have been made to the equipment and it is debited as all the expenses and losses are debited according to the accounting rule.
Cash account is an asset account. Cash account decreases as the amount of repairs are paid in cash, hence the asset decreases and all the assets are credited as their value decreases.

Record depreciation charged on equipment.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31,2017	Depreciation		43,590
	Accumulated Depreciation			43,590
	(To record the depreciation)

Table (6)

Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of actual cost of the asset at the end of 2017:

Actual cost=(Cost of the asset−Depreciation in 2016)+Improvement cost=($283,400−$70,850)+$5,400=$212,500+$5,400=$217,950