Question #3:--430 arks) Whyte Company purchased a forklift for cash, on January

Question

Question #3:--430 arks) Whyte Company purchased a forklift for cash, on January 1, 2015 for $35,000. The estimated life of the Asset is 5 years. Required: (a) Prepare the Journal Entry to record the purchase of the forklift. (b) Prepare the adjusting Journal Entries to record depreciation expense, on each of the years at December 31, 2015, 2016, 2017 using Declining Balance Depreciation December 31,2015-2017 using Straight- line Depreciation. Depreciation from above, at December 31,2017, for S20,000. (c) Prepare the adjusting entry to record depreciation expense, on each of the years at (d) Prepare the journal entries to record the disposal of the Forklift, using both methods of

Explanation / Answer

Journal entries Event Date Account Titles Debit Credit a Jan.1,2015 Forklift $35,000.00 Cash $35,000.00 b Dec.31,2015 Depreciation Expense $7,000.00 Accumulated Depreciation - Forklift $7,000.00 Dec.31,2016 Depreciation Expense $5,600.00 Accumulated Depreciation - Forklift $5,600.00 Dec.31,2017 Depreciation Expense $4,480.00 Accumulated Depreciation - Forklift $4,480.00 Depreciation per year under double declining balance method = 2* straight line depreciation rate * Beginning book value of forklift Depreciation per year using Straight line method = (Cost - residual value)/Estimated life of forklift Depreciation per year using Straight line method = ($35000 - $0)/5 years = $7000 Straight line depreciation rate = $7000 / $35000 = 20% Journal entries Event Date Account Titles Debit Credit c Dec.31,2015 Depreciation Expense $7,000.00 Accumulated Depreciation - Forklift $7,000.00 Dec.31,2016 Depreciation Expense $7,000.00 Accumulated Depreciation - Forklift $7,000.00 Dec.31,2017 Depreciation Expense $7,000.00 Accumulated Depreciation - Forklift $7,000.00 Journal entry for disposal of asset under declining balance method Event Date Account Titles Debit Credit d-1 Dec.31,2017 Cash $20,000.00 Accumulated Depreciation - Forklift $17,080.00 Forklift $35,000.00 Gain on disposal of Forklift $2,080.00 Journal entry for disposal of asset under straight line method Event Date Account Titles Debit Credit d-2 Dec.31,2017 Cash $20,000.00 Accumulated Depreciation - Forklift $21,000.00 Forklift $35,000.00 Gain on disposal of Forklift $6,000.00

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