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Recording Depreciation and Repairs (Straight-Line Depreciation) LO8-2, 8-3 [The following information applies to the questions displayed below
Recording Depreciation and Repairs (Straight-Line Depreciation) LO8-2, 8-3 [The following information applies to the questions displayed below.) Hulme Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2020, an asset account for the company showed the following balances: Manufacturing equipment Accumulated depreciation through 2019 $ 106,000 64,000 During 2020, the following expenditures were incurred for the equipment: Major overhaul of the equipment on January 2, 2020, that improved efficiency Routine maintenance and repairs on the equipment $ 18,000 800 The equipment is being depreciated on a straight-line basis over an estimated life of 15 years with a $10,000 estimated residual value. The annual accounting period ends on December 31. E8-7 Part 3 Required: 3. Prepare the journal entries to record the two expenditures during 2020. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) Answer is not complete. General Journal NO Transaction Credit Debit 18,000 1 Equipment Cash 18,000
Expert Solution
| no | Transaction | General journal | Debit | Credit | |||||
| 1 | 1 | Equipment | 18,000 | ||||||
| cash | 18,000 | ||||||||
| 2 | 2 | Repairs and maintenance | 800 | ||||||
| cash | 800 | ||||||||
other answers and explanations if you need
| Dep on orginal value | (106000-10000)/15 | ||||||||||
| 6400 | |||||||||||
| Accumulated dep for number of years | 64000/6400 | ||||||||||
| 10 | |||||||||||
| original cost | 106,000 | ||||||||||
| Accumulated depreciation | 64,000 | ||||||||||
| book value | 42,000 | ||||||||||
| Add:major overhaul | 18,000 | ||||||||||
| less:Salvage value | -10,000 | ||||||||||
| Cost to be depreciated | 50,000 | ||||||||||
| remaining useful life(15-10) | 5 | ||||||||||
| Depreciation expense now | 10000 | ||||||||||
| 1) | Even/Date | Assets | = | liabilities | + | Stockholder's Equity | |||||
| 2019 | Accumulated depreciation | -6400 | = | Depreciation expense | -6400 | ||||||
| 2) | Even/Date | Assets | = | liabilities | + | Stockholder's Equity | |||||
| 2020 | |||||||||||
| a) | Equipment | 18,000 | |||||||||
| Cash | -18,000 | ||||||||||
| b) | Cash | -800 | Repairs &maintenance exp | -800 | |||||||
| Entry for depreciation for year 2020 | |||||||
| no | Transaction | General journal | Debit | Credit | |||
| 31dec,2020 | Depreciation expense | 10,000 | |||||
| Accumulated depreciation | 10,000 | ||||||
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