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Chapter 3: Question 10BE (page 128)

BE3-10 (L03) At the end of its first year of operations, the trial balance of Alonzo Company shows Equipment \(30,000 and zero balances in Accumulated Depreciation鈥擡quipment and Depreciation Expense. Depreciation for the year is estimated to be \)2,000. Prepare the adjusting entry for depreciation at December 31, and indicate the balance sheet presentation for the equipment at December 31.

Short Answer

Expert verified

The net equipment value is $28,000.

Step by step solution

01

Meaning of Balance Sheet

A statement that includes the detail of assets owned and liabilities owed by business entities or individuals at any definite date is known as theBalance Sheet. Stakeholders use it to assess the financial position of entities.

02

Adjusting entry for depreciation at December

Date

Accounts and Explanation

Debit $

Credit $

December, 31

Depreciation expenses

$2,000

Accumulated depreciation-equipment

$2,000

03

Balance sheet presentation for Equipment 

Property Plant and Equipment

Amount $

Amount $

Equipment

$30,000

Less: Depreciation on equipment

$(2,000)

Equipment net of depreciation

$28,000

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Most popular questions from this chapter

EXCEL (Adjusting Entries) The ledger of Duggan Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.

Debit Credit

Prepaid Insurance \(3,600

Supplies \)2,800

Equipment \(25,000

Accumulated Depreciation- Equipment \)8,400

Notes Payable \(20,000

Unearned Rent Revenue \)9,300

Rent Revenue \(60,000

Interest Expenses -0-

Salaries and Wages Expenses \)14,000

An analysis of accounts shows the following.

  1. The equipment depreciates \(250 per month.

  2. One-third of the unearned rent was recognized as revenue during the quarter.

  3. Interest of \)500 is accrued on the notes payable.

  4. Supplies on hand total \(850

  5. Insurance expires at the rate of \)300 per month.

Instructions

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expenses, Insurance Expenses, Interest Payable, and Supplies expenses. (Omit Explanations)

鈥淎 worksheet is a permanent accounting record, and its use is required in the accounting cycle. 鈥淒o you agree? Explain.

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sep. 1

Kawabata begins practice as a dentist and invests \(20,000 cash

2

Purchases dental equipment on account from Green Jacket Co. for \)17,280

4

Pays rent for office space, \(680 for the month.

4

Employs a receptionist, Michael Bradley

5

Purchases dental supplies for cash, \)942

8

Receives cash of \(1,690 from patients for services performed

10

Pays miscellaneous office expenses, \)430.

14

Bills patients \(5,820 for services performed.

18

Pays Green Jacket Co. on account, \)3,600.

19

Withdraws \(3,000 cash from the business for personal use.

20

Receives \)980 from patients on account

25

Bills patients \(2,110 for services performed

30

Pays the following expenses in cash: salaries and wages \)1,800; miscellaneous office expenses \(85.

30

Dental supplies used during September, \)330.

Instructions

  1. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment, Accumulated Depreciation鈥擡quipment, Accounts Payable, Owner鈥檚 Capital, Service Revenue, Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation Expense, and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for each of the other accounts needed. Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value. Do not use a drawing account.
  2. Prepare a trial balance
  3. Prepare an income statement, a statement of owner鈥檚 equity, and an unclassified balance sheet.
  4. Close the ledger
  5. Prepare a post-closing trial balance.

Andrea Pafko, a fellow student, contends that the double-entry system means that each transaction must be recorded twice. Is Andrea correct? Explain.

Do the following events represent business transactions?

Explain your answer in each case

  1. A computer is purchased on account.
  2. A customer returns merchandise and is given credit on account.
  3. A prospective employee is interviewed
  4. The owner of the business withdraws cash from the business for personal use.
  5. Merchandise is ordered for delivery next month.
See all solutions

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