Question

For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on assets, liabilities, and net income by entering for each account affected the account name and amount and indicating whether it is an addition (+) or a subtraction (—)_ Transaction a has been done as an illustration. Net income is not affected by every transaction. In some cases, only one column may be affected because all of the specific accounts affected by the transaction are included in that category.
a. Recorded $200 of depreciation expense.
b. Sold land that had originally cost $9,000 for $13,000 in cash.
c. Acquired a new machine under a financing lease. The present value of future lease payments, discounted at 11%, was $11,000.
d. Recorded the first annual payment of $2,800 for the leased machine (in part c).
d. Recorded a $5,900 payment for the cost of developing and registering a trademark.
e. Recognized periodic amortization for the trademark (in part e) using a 34-year useful life.
f. Sold used production equipment for $16,000 in cash. The equipment originally cost $45,000, and the accumulated depreciation account has an unadjusted balance of $23,700. It was determined that a $1,800 year-to-date depreciation entry must be recorded before the sale transaction can be recorded.

Required:
Record the adjustment and the sale.

Answer 1

Answer:

a. Recorded $200 of depreciation expense.

depreciation expense 200 debit (-net income)

 accumulated depreciation  200 credit (-assets)

b. Sold land that had originally cost $9,000 for $13,000 in cash.

cash 13,000 debit +assets

  land             9,000 credit -assets

 gain on sale 4,000 credit +net income

c. Acquired a new machine under a financing lease. The present value of future lease payments, discounted at 11%, was $11,000.

machinery  11,000 debit +assets

 lease liability 11,000 credit +liability

d. Recorded the first annual payment of $2,800 for the leased machine (in part c).

lease liability 2,800 debit -liability

cash                     2,800 credit -assets

d. Recorded a $5,900 payment for the cost of developing and registering a trademark.

trademark 5,900 debit +assets

cash  5,900 credit -assets

e. Recognized periodic amortization for the trademark (in part e) using a 34-year useful life.

 amortization 173 debit -net income

trademark 173 credit -asset

f. Sold used production equipment for $16,000 in cash. The equipment originally cost $45,000, and the accumulated depreciation account has an unadjusted balance of $23,700. It was determined that a $1,800 year-to-date depreciation entry must be recorded before the sale transaction can be recorded.

book value  45,000 - 23,700 - 1,800 = 19,500

sale price = 16,000  loss of 3,500

cash                             16,000  debit +assets

acc depreciation        23,700 debit +asset

depreciation expense  1,800 debit -net income

loss on disposal           3,500 debit -net income

equipment                                   45,000 credit -assets

Explanation:

We follow the accounting principles:

debit = credit

asset + expense = liabilities + equity + expenses

DEBIT //  CREDIT           DEBIT //  CREDIT

----------------------          ---------------------------------

+++++   //  --------             ------- ///    +++++++

Left side increase fro mdebit and decrease from credit

right side increase through credit decrease with debit.