Presented below is the trial balance for ABC, Inc. as of December 31, 2008, befo
ID: 2392823 • Letter: P
Question
Presented below is the trial balance for ABC, Inc. as of December 31, 2008, before adjusting entries:
ABC , INC.
Trial Balance
December 31, 2008
DR
CR
Cash
$28,400
Accounts Receivable
12,500
Prepaid Insurance
7,200
Equipment
25,000
Accumulated Depreciation – Equipment
$ 800
Unearned Revenue
6,000
Notes Payable
7,950
Retained Earnings
5,000
Common Stock
29,000
Fee Revenue
39,000
Salaries Expense
13,200
Supplies Expense
950
Interest Expense
500
$ 87,750
$ 87,750
31. The Equipment was purchased on September 1, 2007. It has a useful life of ten years and an estimated salvage value of $1,000. ABC uses the straight-line method of depreciation. The adjusting entry at December 31, 2008 would include a:
a. credit to Accumulated Depreciation –Equipment for $800.
b. credit to Accumulated Depreciation –Equipment for $2,400.
c. debit to Depreciation Expense –Equipment for $800.
d. credit to Equipment for $2,400.
e. none of the above
32. Refer to the previous question. The adjusted balance in Accumulated Depreciation--Equipment on December 31, 2008, after the adjusting entry is:
33. Refer to question #31. At what amount will the Equipment be reported on the financial statements for the year ended December 31, 2008?
DR
CR
Cash
$28,400
Accounts Receivable
12,500
Prepaid Insurance
7,200
Equipment
25,000
Accumulated Depreciation – Equipment
$ 800
Unearned Revenue
6,000
Notes Payable
7,950
Retained Earnings
5,000
Common Stock
29,000
Fee Revenue
39,000
Salaries Expense
13,200
Supplies Expense
950
Interest Expense
500
$ 87,750
$ 87,750
Explanation / Answer
31)
Journal Entry for Depreciation
Depreciation Expenses a/c Dr. 2400
To Accumulated Depreciation 2400
(To record Equipment Depreciation Expenses )
Note: Depreciation Expenses for a year = (25,000-1000)/10
= 2400
* Machine purchased in 2007, Accounting Treatment Asked for 2008.
So Answer will be option B. Credit to Accumulated Depreciation - Equipment for $2400.
32)
Accumulated Depreciation for 2007 = 800
Accumulated Depreciation for 2008 = 2,400
So Total Adjusted Balance in Accumulated Depreciation - Equipment on Dec 31, 2008 will be
(2,400 + 800 = 3,200)
Note :
Machine Puchased on Sept 1, 2007 so depreciation would be charged for 4 months only
so depreciation expense will be 2400 * 4/12 = 800 for 2007.
33) Euipment will be reported on Book Value or carrying value ( cost - Depreciation) in Financial Statements.
So Euipment's Carrying Value on 31st Dec,2008 will be = 25,000-(2400+800)
= 21,800 $ Answer
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