
Concept explainers
Prepare journal entries to record the given transaction.

Explanation of Solution
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Plant Assets:
Plant assets are the long-term assets used by the company, which have physical existence, and can be seen, touched and felt. Some of the examples of the plant assets include equipment, buildings, furniture and fixtures, plant, property, and land.
Journalize the given transactions as follows:
- On January 5 of Year 1 SD Service purchased a new truck for $28,500 cash.
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 1 | |||||
March | 1 | Equipment (A+) | 28,500 | ||
Cash (A–) | 28,500 | ||||
(To record purchase of equipment) |
Table (1)
Description:
- Equipment is an asset account and it is increased. Therefore, debit Equipment account with $28,500.
- Cash is an asset account and it is decreased. Therefore, credit Cash account with $28,500.
- On March 2 of Year 1, SD Service incurred painting charges of $580:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 1 | |||||
March | 2 | Painting Expenses (E–) | 580 | ||
Cash (A–) | 580 | ||||
(To record painting expenses for the truck) |
Table (2)
Description:
- Painting Expenses is an expense account and it is increased by $580. Expenses are the component of
stockholder’s Equity and it decreases the value of equity. Therefore, debit Painting Expenses account with $580. - Cash is an asset account and it is decreased. Therefore, credit Cash account with $580.
- On December 31 of Year 1, SD Service recorded
depreciation on the truck for the year:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 1 | |||||
December | 31 | Depreciation Expense (E–) (1) | 4,283 | ||
Equipment (A–) | 4,283 | ||||
(To record depreciation expense) |
Table (3)
Description:
- Depreciation Expense is an expense account and it is increased by $4,283. Expenses are the component of stockholder’s Equity and it decreases the value of equity. Therefore, debit Depreciation Expenses account with $4,283.
- Accumulated Depreciation is a contra-asset account and would have a normal credit balance. Therefore, credit Accumulated Depreciation account with $4,283.
Working Notes:
Compute depreciation expense:
- On July 1 of Year 2, SD Service installed air conditioning for $1,808 cash in the truck:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 2 | |||||
July | 1 | Equipment (A+) | 1,808 | ||
Cash (A–) | 1,808 | ||||
(To record installation of air conditioning) |
Table (4)
Description:
- Equipment is an asset account and it is increased. Therefore, debit Equipment account with $1,808.
- Cash is an asset account and it is decreased. Therefore, credit Cash account with $1,808.
- On September 7 of Year 2, SD Service incurred expenses of $430 for truck tune up maintenance:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 2 | |||||
September | 7 | Maintenance Expenses (E–) | 430 | ||
Cash (A–) | 430 | ||||
(To record maintenance expenses) |
Table (5)
Description:
- Maintenance Expense is an expense account and it is increased by $430. Expenses are the component of stockholder’s Equity and it decreases the value of equity. Therefore, debit Maintenance Expenses account with $430.
- Cash is an asset account and it is decreased. Therefore, credit Cash account with $430.
- On December 31 of Year 2, SD Service recorded depreciation on the truck for the year:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 2 | |||||
December | 31 | Depreciation Expense (E–) (4) | 6,254 | ||
Accumulated Depreciation – Equipment (A–) | 6,254 | ||||
(To record depreciation expense) |
Table (6)
Description:
- Depreciation Expense is an expense account and it is increased by $6,254. Expenses are the component of stockholder’s Equity and it decreases the value of equity. Therefore, debit Depreciation Expenses account with$6,254.
- Accumulated Depreciation is a contra-asset account and would have a normal credit balance. Therefore, credit Accumulated Depreciation account with $6,254.
Working Notes:
Compute depreciation expense.
Compute accumulated depreciation till July 1 of year 2.
Accumulated depreciation till December 31 of year 1 = $4,283 (1)
Accumulated depreciation till July 1 of year 2 = $2,570 (2)
Compute remaining depreciable amount as on July 1 of year 2:
Computation of Depreciation | |
Acquisition cost, March 1, year 1 | $28,500 |
Additional air conditioning charges | 1,808 |
Total cost | 30,308 |
Less: Accumulated depreciation till July 1, year 2 | (6,853) |
Book value, July 1, year 2 | 23,455 |
Less: Revised salvage value | (3,200) |
Remaining depreciable amount | $20,255 |
Table (7)
Compute depreciation due to change in estimate in July 1 of year 2:
Remaining depreciable amount = $20,255 (Table 7)
Number of months = 33 months (July 1 of year 2 to March 5 of year 6)
Compute depreciation from July 1 to December 31 of year 2:
Monthly depreciation = $614 (3)
Number of months = 6 months (July to December 31)
Compute depreciation expense for year 2:
Depreciation expense from January 1 to July 1 = $2,570(2)
Depreciation expense from July 1 to December 31 = $3,684 (4)
- On September 3 of Year 3, SD Service incurred expenses of $130 for truck maintenance:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 3 | |||||
September | 3 | Maintenance Expenses (E–) | 130 | ||
Cash (A–) | 130 | ||||
(To record maintenance expenses) |
Table (8)
Description:
- Maintenance Expense is an expense account and it is increased by $130. Expenses are the component of stockholder’s Equity and it decreases the value of equity. Therefore, debit Maintenance Expenses account with $130.
- Cash is an asset account and it is decreased. Therefore, credit Cash account with $130.
- On December 31 of Year 3, SD Service recorded depreciation on the truck for the year:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 3 | |||||
December | 31 | Depreciation Expense (E–) (5) | 7,368 | ||
Accumulated Depreciation – Equipment (A–) | 7,368 | ||||
(To record depreciation expense) |
Table (9)
Description:
- Depreciation Expense is an expense account and it is increased by $7,368. Expenses are the component of stockholder’s Equity and it decreases the value of equity. Therefore, debit Depreciation Expenses account with $7,368.
- Accumulated Depreciation is a contra-asset account and would have a normal credit balance. Therefore, credit Accumulated Depreciation account with $7,368.
Working Notes:
Compute depreciation for year 3:
Monthly depreciation = $614 (3)
Number of months = 12 months
- On December 31 of Year 4, SD Service recorded depreciation on the truck for the year:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) | |
Year 4 | |||||
December | 31 | Depreciation Expense (E–) | 7,368 | ||
Accumulated Depreciation – Equipment (A–) | 7,368 | ||||
(To record depreciation expense) |
Table (10)
Description:
- Depreciation Expense is an expense account and it is increased by $7,368. Expenses are the component of stockholder’s Equity and it decreases the value of equity. Therefore, debit Depreciation Expenses account with $7,368.
- Accumulated Depreciation is a contra-asset account and would have a normal credit balance. Therefore, credit Accumulated Depreciation account with $7,368.
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Chapter 9 Solutions
Financial Accounting for Undergraduates
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