Part 1 : Store equipment is purchased on January 1, 2002 at a cost of $14,000 an
ID: 2343705 • Letter: P
Question
Part 1 :Store equipment is purchased on January 1, 2002 at a cost of $14,000 and $1,000 was spent on its installation. The depreciation is written-off at 10% on the original cost every year. The books are closed on December 31, every year.
Instructions:
Prepare a Depreciation Expense-Stores Equipment Account and an Accumulated Depreciation-Stores Equipment Account.
Part 2 :
A company acquired office equipment on January 1, 2001 at a cost of $40,000 and spent $1,000 on its installation. The company writes-off depreciation at 10% using the reducing balance method. The accounting books are closed on December 31 each year.
Instructions:
Show the depreciation account for three years.
Explanation / Answer
1. DR Depreciation expense 1,500 (14,000+1,000)*.10 CR Accumulated Depreciation 1,500 Yearly entry 2. DR Depreciation expense 4,100 (40,000+1,000)*.10 CR Accumulated depreciation 4,100 Year 1 DR Depreciation expense 3,690 (41,000-4,100)*.10 CR Accumulated depreciation 3,690 Year 2 DR Depreciation expense 3,321 CR Accumulated depreciation 3,321 (41,000-4,100-3,690)*.10 Year 3