1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
algol [13]
3 years ago
12

Loban Company purchased four cars for $9,000 each and expects that they will be sold in 3 years for $1,500 each. The company use

s group depreciation on a straight-line basis. Required: Prepare journal entries to record the acquisition and the first year's depreciation expense. If one of the cars is sold at the beginning of the second year for $7,000, what journal entry is required?
Business
1 answer:
VLD [36.1K]3 years ago
7 0

Answer:

a). The journal entries required to record the acquisition of the four cars are as follows:

     i)  credit motor vehicle account with the amount paid to purchase the four cars = $ 36,000

     ii) Credit bank  account with the the amount paid to purchase the four cars = $ 36,000

b). The journal entries required to record the 1st year's depreciation expense :

     i)  Debit the motor vehicle expense account with the amount accruing for the periods expense =$ 10,000 .

     ii) Credit the accumulated depreciation with the same amount = $ 10,000 .

b)   The journal entries required to record the gain on disposal of the motor vehicle is as follows:

    i) Debit the Cash account by amount gained = $ 500 .

    ii) Debit the Accumulated depreciation account by amount = $ 500 .

     iii) Credit the Motor vehicle account by amount = $ 500 .

     iv) Credit the Gain on disposal account by amount = $ 500 .

Explanation:

<u>a).  Determining the depreciation expense</u>

<u>Step 1 </u>

Get the purchase price for all the four cars using the expression below;

Total purchase price=purchase price per car×number of cars purchased

where;

purchase price per car=$9,000

number of cars purchased=4

replacing;

Total purchase price=(9,000×4)=36,000

Total purchase price=$36,000

<u>Step 2 </u>

Determine the salvage value after the useful life as shown;

Salvage value=selling price per car×number of cars

where;

selling price per car=$1,500

number of cars=4

replacing;

Salvage value=(1,500×4)=6,000

Salvage value=$6,000

<u>Step 3 </u>

Determine the depreciation base as shown;

depreciation base=total purchase price-salvage value

where;

total purchase price=$36,000

salvage value=$6,000

replacing;

depreciation base=(36,000-6,000)=$30,000

annual depreciation cost=depreciation base/useful life

annual depreciation cost=30,000/3

annual depreciation cost=$10,000

The first year's depreciation expense=$10,000  

Therefore, expected journal entries are as follows:

    i)  credit motor vehicle account with the amount paid to purchase the four cars = $ 36,000

     ii) Credit bank  account with the the amount paid to purchase the four cars = $ 36,000

b). The journal entries required to record the 1st year's depreciation expense :

     i)  Debit the motor vehicle expense account with the amount accruing for the periods expense =$ 10,000 .

     ii) Credit the accumulated depreciation with the same amount = $ 10,000 .

b)<u>.  Determining whether car was sold at a loss or gain.</u>

Car book Value = Acquisition cost - Accumulated depreciation

Car book Value = 9,000 - 2,500 = $ 6,500

Loss /Gain =  Consideration price( disposal price)  - Acquisition cost

Loss /Gain = $7,000 - $6,500 = $ 500

The company realized a gain of = $ 500

Therefore, expected journal entries are as follows:

i) Debit the Cash account by amount gained = $ 500 .

ii) Debit the Accumulated depreciation account by amount = $ 500 .

iii) Credit the Motor vehicle account by amount = $ 500 .

iv) Credit the Gain on disposal account by amount = $ 500 .

You might be interested in
Consider the following scenario to answer the following questions: Kukla makes tables, with an opportunity cost of 3 rugs per ev
mote1985 [20]

Answer:

E

Explanation:

In this question, we are told to state what the reaction of Koka and Zola will be;

Kukla and Zola both like the proposal. As according to the given opportunity cost for Kukla (3 rugs per every 4 tables) she can get 1.5 rugs for 2 tables .But with the offer made now she can get 2 rugs for giving 2 tables.

Given the opportunity cost for Zola ( 2 tables per every 3 rugs ) she must give 3 rugs for getting 2 tables. But with the offer made she can now get 2 tables for giving away only 2 rugs .

So both Kukla and Zola are happy with the offer.

3 0
3 years ago
Read 2 more answers
You have been offered a project paying​ $300 at the beginning of each year for the next 20 years. What is the maximum amount of
Vitek1552 [10]

Answer:

The project is worth $2,738.57.

Explanation:

Giving the following information:

You have been offered a project paying​ $300 at the beginning of each year for the next 20 years. The rate of return is 9%.

To calculate the present value, first, we need to calculate the final value:

FV= {A*[(1+i)^n-1]}/i

A= annual pay= 300

n= 20

i= 0.09

FV= {300*[(1.09^20)-1]}/0.09

FV= $15,348.06

Now, we can calculate the present value:

PV= FV/(1+i)^n

PV= 15,348.06/1.09^20= $2,738.57

8 0
3 years ago
For accounting errors, which of the below sentences is true?
Monica [59]

Answer:

The correct option is C

Explanation:

Accounting error is the type of error in the accounting which was not done intentionally but when spotted, the error need to be fixed immediately. And when there is no immediate solution for the error, an investigation is conducted in order to find out who caused the error.

The statement which is true is that they represent the fraud which usually result in the legal action to be taken.

7 0
3 years ago
Describe at least three ways you will implement your project to soften the impact of the issue on the community
brilliants [131]
We can enumerate three ways on how we can implement the project that would soften the impact of the issue on the community. These three ways are enumerated below:
1. Understand the talent of the youth and discuss the proposed project that would help to their development. The benefit of this project is to divert the attention of the youth into a healthy lifestyle instead of being attractive into illegal drugs which are very common nowadays.
2. Discuss the projects by giving them the all the options that would benefit them rather than creating damage to their livelihood. Organize meetings and open forum.
3. Introduce to them the health impact of the project.
8 0
3 years ago
On January 1 of this year, Shannon Company completed the following transactions (assume a 8% annual interest rate):
inessss [21]

Answer:

a. The cost of the truck that should be recorded at the time of purchase is:

= $48,741.

b. The option of paying $11,400 annually for 3 years results in a PV of $29,379, which is lower than $30,000 paid immediately.

c. The single amount that must be deposited in this account on January 1 of this year is:

= $54,148.

d. The single sum that must be deposited in the bank on January 1 of this year to provide 8 equal annual year-end payments of $41,400 to a retired employee is:

= $237,910.85

Explanation:

a) Data and Calculations:

a. Bought a delivery truck and agreed to pay $61,400 at the end of three years.

From an online financial calculator:

(# of periods)  3

I/Y (Interest per year)  8

PMT (Periodic Payment)  0

FV (Future Value)  $61400

Results

PV = $48,741.30

Total Interest $12,658.70

b. Rented an office building and was given the option of paying $11,400 at the end of each of the next three years or paying $30,000 immediately.

From an online financial calculator:

N (# of periods)  3

I/Y (Interest per year)  8

PMT (Periodic Payment)  $11,400

FV (Future Value)  0

Results

PV = $29,378.91

Sum of all periodic payments $34,200.00

Total Interest $4,821.09

c. Established a savings account by depositing a single amount that will increase to $92,800 at the end of seven years.

From an online financial calculator:

N (# of periods)  7

I/Y (Interest per year)  8

PMT (Periodic Payment)  0

FV (Future Value)  $92,800

Results

PV = $54,147.91

Total Interest $38,652.09

d. Decided to deposit a single sum in the bank that will provide 8 equal annual year-end payments of $41,400 to a retired employee (payments starting December 31 of this year.

From an online financial calculator:

N (# of periods)  8

I/Y (Interest per year)  8

PMT (Periodic Payment) $41,400

FV (Future Value)  0

Results

PV = $237,910.85

Sum of all periodic payments $331,200.00

Total Interest $93,289.15

4 0
2 years ago
Other questions:
  • Donna Corporation manufactures custom cabinets for kitchens. It uses a normal- costing system with two direct-cost categories-di
    15·1 answer
  • Why does mercedes oil change cost so much?
    12·1 answer
  • Which of the following would be an effective way to let a national producer of children’s toys know that its products are substa
    11·1 answer
  • Tomas recently graduated with honors from his college. He has bragged to his friends that his academic performance has prepared
    7·1 answer
  • A business’s total revenue for a specified period is $500,000, its operating expenses are $50,000, and its net profit if $150,00
    6·1 answer
  • The process of choosing an option after evaluating the available information and weighing the costs and benefits of the alternat
    12·1 answer
  • The Analytic Hierarchy Process is being employed in a project selection decision. One major criteria, cost, receives a weighting
    7·1 answer
  • Discuss Basic elements of Organization structure?
    10·1 answer
  • World Company expects to operate at 80% of its productive capacity of 50,000 units per month. At this planned level, the company
    15·1 answer
  • Briefly explain economics​
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!