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sergejj [24]
3 years ago
11

Waterway Corporation purchased a truck at the beginning of 2020 for $59,500. The truck is estimated to have a salvage value of $

2,380 and a useful life of 190,400 miles. It was driven 27,370 miles in 2020 and 36,890 miles in 2021. Compute depreciation expense using the units-of-production method for 2020 and 2021.
A. Depreciation expense for 2020
B. Depreciation expense for 2021
Business
1 answer:
blondinia [14]3 years ago
5 0

Answer:

In 2020: $ 8,211 and in 2021: $ $11,067

Explanation:

In the units-of-production method, the cost of depreciation is dependent of the asset usage. Depreciation is spread across the units produced.

for waterway corporation:

Cost price = $59,500

salvage value $2,380

useful life 190, 000 miles

Depreciable value: Cost price- salvage value

    =59,500-2380

    =57,120

Depreciation per unit= Depricable cost / by expected mileage

         =  $57,120/190,000

     =$0.30 per unit

Depreciation in 2020: usages x depreciation rate

      =27,370 x 0.30

      =$8,211

Depreciation in 2021: 36,890 x0.30

      =In the units-of-production method, the cost of depreciation is dependant of the asset usage. Depreciation is spread across the units produced.

for waterway corporation:

Cost price = $59,500

salvage value $2,380

useful life 190, 000 miles

Depreciable value: Cost price- salvage value

    =59,500-2380

    =57,120

Depreciation per unit= depricable cost / by expected mileage

         =  $57,120/190,000

     =$0.30 per unit

Depreciation in 2020: usages x depreciation rate

      =27,370 x 0.30

      =$8,211

Depreciation in 2021: 36,890 x0.30

      =$11,067

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The journal entries for the given transactions are recorded as follows:

1) The issue of preferred stock is recorded by debiting the cash account by $14,560,000 and crediting the preferred stock and additional capital by $13,000,000 and 156,000.

2) The repurchase of common stock is recorded by debiting the treasury stock and crediting the cash with the same amount of $223,200.

3) The dividend declared on preferred stock is recorded by debiting the retained earnings and crediting the dividend payable with equal amounts of $910,000 and at the time of making payment of dividends to preferred investors, the dividend payable should be debited and cash should be credited with same amounts of $910,000.

4) The dividend declared on common stock is recorded by debiting the retained earnings and crediting the dividend payable with equal amounts of $2,101,880. The dividends to common investors are recorded by debiting the dividend payable and crediting the cash with equal amounts of 2,101,880.

5) The transfer of net income at year-end is recorded by debiting the net income and crediting the Retained earnings with equal amounts of $3,546,000.

<h3>What are the journal entries?</h3>

Journal entries are used to recognize the transactions of financial nature as and when entered by an entity. It is the primary step in the accounting process.

The journal entries for the provided transactions are as follows:

Date          Particulars                                              Debit ($)      Credit ($)

Jan 10   Cash Account (130,000 shares X $112 )   14,560,000

                  Preferred Stock (130,000 shares X $100)               13,000,000

                  Additional capital (130,000 shares X $12)                 156,000  

               (To record the issue of preferred stock )

Feb 8    Treasury stock (18,600 shares X $12)        223,200

                  Cash                                                                            223,200

             (To record the repurchase of common stock )

May 9   Retained earnings (130,000 X $100 X 7%) 910,000

                 Dividend payable                                                      910,000

               (To record the dividend declared on preferred stock )

Jun 8     Retained earnings(1,255,000-18,600 X $1.70) 2,101,880

                  Dividend payable                                                       2,101,880

               (To record the dividend declared on common stock )

Jun 10    Dividend payable                                               910,000

                    Cash                                                                            910,000

                (To record the payment of preferred dividends)

July 1      Dividend payable                                            2,101,880

                    Cash                                                                           2,101,880

                (To record the payment of common dividends)

Dec 31    Net income                                                      3,546,000

                   Retained earnings                                                     3,546,000

                (To record the transfer of net income at year-end)

Therefore, the journal entries for the provided transactions are recognized as above.

Learn more about the journal entries in the related link:

brainly.com/question/16171837

#SPJ1

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