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Chapter 3: 13Q (page 127)

Jay Hawk, maintenance supervisor for Boston Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the ground and corporate headquarters. He has sent the following information to the accounting department.

Cost of Mover and Accessories

\(4,000

Date Purchased

7/1/2017

Estimated Useful Life

5 yrs

Monthly Salary of Groundskeeper

\)1,100

Salvage Value

\(0

Estimated Annual Fuel Cost

\)150

Compute the amount of depreciation expense(related to the mover and accessories) that should be reported on Boston鈥檚 December 31, 2017, Income Statement. Assume straight-line depreciation.

Short Answer

Expert verified

The depreciation expenses reported in the income statement are $800.

Step by step solution

01

Definition of Depreciation Expense

The depreciation expense is the reduction in the value of fixed assets as a result of effluxion of time, use in business wear and tear, etc. The cost of fixed assets is amortized over the useful life of the asset instead.

02

Depreciation Expense

Particulars

Amount $

Original Cost

$4,000

Salvage Value

$0

Useful Life

5 Yrs

Depreciation Expense (($4,000-$0) / 5)

$800

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Most popular questions from this chapter

Employees are paid every Saturday for the preceding work week. If a balance sheet is prepared on Wednesday, December 31, what does the amount of wages earned during the first three days of the week (12/29, 12/30, 12/31) represent? Explain.

Why are revenue and expense accounts called temporary or nominal accounts?

E3-8 (L03) EXCEL (Adjusting Entries) Andy Roddick is the new owner of Ace Computer Services. At the end of August2017, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information relatedto unrecorded expenses that the business incurred during August.1. At August 31, Roddick owed his employees \(1,900 in wages that will be paid on September 1.2. At the end of the month, he had not yet received the month鈥檚 utility bill. Based on past experience, he estimated the billwould be approximately \)600.3. On August 1, Roddick borrowed \(30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%.4. A telephone bill in the amount of \)117 covering August charges is unpaid at August 31.InstructionsPrepare the adjusting journal entries as of August 31, 2017, suggested by the information above.

Cooke Company has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below.

COOKE COMPANY

Worksheet

For The Month Ended September 30, 2017


Trial Balance
Adjusted Trial Balance

Account Titles

Dr.

Cr.

Dr.

Cr.

Cash

37,400

37,400

Supplies

18,600

4,200

Prepaid Insurance

31,900

3,900

Land

80,000

80,000

Equipment

120,000

120,000

Accumulated Depreciation鈥擡quipment

36,200

42,000

Accounts Payable

14,600

14,600

Unearned Service Revenue

2,700

700

Mortgage Payable

50,000

50,000

Common Stock

107,700

107,700

Retained Earnings, Sept. 1, 2017

2,000

2,000

Dividends

14,000

14,000

Service Revenue

278,500

280,500

Salaries and Wages Expense

109,000

109,000

Maintenance and Repairs Expense

30,500

30,500

Advertising Expense

9,400

9,400

Utilities Expenses

16,900

16,900

Property Tax Expense

18,000

21,000

Interest Expense

6,000

12,000

Totals

491,700

491,700

Insurance Expense

28,000

Supplies Expense

14,400

Interest Payable

6,000

Depreciation Expense

5,800

Property Taxes Payable

3,000

Totals

506,500

506,500

Instructions

(a) Prepare a complete worksheet.

(b) Prepare a classified balance sheet. (Note: $10,000 of the mortgage payable is due for payment in the next fiscal year.)

(c) Journalize the adjusting entries using the worksheet as a basis.

d) Journalize the closing entries using the worksheet as a basis.

(e) Prepare a post-closing trial balance.

(L07) (Cash to Accrual Basis) Jill Accardo, M.D., maintains the accounting records of Accardo Clinic on a cash basis. During 2017, Dr. Accardo collected \(142,000 from her patients and paid \)55,470 in expenses. At January 1, 2017, and December 31, 2017, she had accounts receivable, unearned service revenue, accrued expenses, and prepaid expenses as follows. (All long-lived assets are rented.)

January 1, 2017, December 31,2017

Account receivable \(9,250 \)15,927

Unearned service revenue \(2,840 \)4,111

Accrued expenses \(3,435 \)2,108

Prepaid expenses \(1,917 \)3,232

Instructions:

Prepare a schedule that converts Dr. Accardo鈥檚 鈥渆xcess of cash collected over cash disbursed鈥� for the year 2017 to net income on an accrual basis for the year 2017.
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