Answer:
a1. Dr Depreciation Expense $8,000
Cr Accumulated Depreciation $8,000
a2. $24,000
b2. December 31
Dr Wages Expenses $440
Cr Wages payable $440
Explanation:
a1. Preparation of the adjusting entry for the first year using the straight-line depreciation method.
Dr Depreciation Expense $8,000
Cr Accumulated Depreciation $8,000
($40,000/5 years)
a2. Computation of the book value at the end of the second year of the equipment's life.
First step is to calculate the First year Book value
First year Book value=$40,000/5 years
First year Book value=$8,000
Second step is to calculate the Second year Book value
Second year Book value=($40,000+$40,000)/5 years
Second year Book value=$80,000/5 years
Second year Book value=$16,000
Now let compute the book value at the end of the second year of the equipment's life.
Book value at the end of the second year=$8,000+$16,000
Book value at the end of the second year=$24,000
Therefore the Book value at the end of the second year will be $24,000
b1. Preparation of the adjusting entry on December 31
December 31
Dr Wages Expenses $440
Cr Wages payable $440
($2,200/5 years)
