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Chapter 3: Q 8SE-2 (page 159)

On October 1, Orlando Gold Exchange paid cash of $57,600 for computers that are expected to remain useful for three years. At the end of three years, the value of the computers is expected to be zero. Requirements 1. Calculate the amount of depreciation for the month of October using the straightline depreciation method. 2. Record the adjusting entry for depreciation on October 31. 3. Post the purchase of October 1 and the depreciation on October 31 to T-accounts for the following accounts: Computer Equipment, Accumulated Depreciation— Computer Equipment, and Depreciation Expense—Computer Equipment. Show their balances at October 31. 4. What is the computer equipment’s book value on October 31?

Short Answer

Expert verified

Adjusting entries are as follows:

Date

Accounts and Explanation

Debit

Credit

Oct.31

Depreciation Expense—Computer Equipment

$1,600

Accumulated Depreciation— Computer Equipment

$1,600

To record depreciation expense

Step by step solution

01

Step-by-Step SolutionStep 1: Explanation on Depreciation Expense

Depreciation expense is the process which allocates the cost of asset over the useful life of the asset.

02

Explanation on Journal Entry

The depreciation expense will be recorded by debiting Depreciation Expense—Computer Equipment and crediting Accumulated Depreciation— Computer Equipment by $1,600, respectively.

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Most popular questions from this chapter

Question :A select list of transactions for Anuradha’s Goals follows:

April 1 Paid six months of rent, \(4,800.

10 Received \)1,200 from customer for six-month service contract that

began April 1.

15 Purchased a computer for \(1,000.

18 Purchased \)300 of office supplies on account.

30 Work performed but not yet billed to customer, \(500.

30 Employees earned \)600 in salaries that will be paid May 2

For each transaction, identify what type of adjusting entry would be needed. Select from the following four types of adjusting entries: deferred expense, deferred revenue, accrued expense, and accrued revenue.

On November 1, Carlisle Equipment had a beginning balance in the Office Supplies account of \(600. During the month, Carlisle purchased \)2,300 of office supplies. At November 30, Carlisle Equipment had $500 of office supplies on hand. Requirements 1. Open the Office Supplies T-account, and enter the beginning balance and purchase of office supplies. 2. Record the adjusting entry required at November 30. 3. Post the adjusting entry to the two accounts involved, and show their balances at November 30.

On September 1, 2018, Salem Landscaping collected $24,000 in advance from customers for landscaping services. The service revenue will be earned monthly over the 12-month period ending August 31, 2019. Requirements 1. Journalize the entry on September 1 by using the alternative treatment of deferred revenues. 2. Record the December 31, 2018 adjusting entry

Question :Chef ’s Catering completed the following selected transactions during May 2018: Learning Objectives 1, 2 Learning Objectives 1, 2 > Exercises May 1 Prepaid rent for three months, \(2,400. 5 Received and paid electricity bill, \)700. 9 Received cash for meals served to customers, \(2,600. 14 Paid cash for kitchen equipment, \)3,000. 23 Served a banquet on account, \(2,800. 31 Made the adjusting entry for rent (from May 1). 31 Accrued salary expense, \)1,600. 31 Recorded depreciation for May on kitchen equipment, \(50. Date May 1 \)(2,400) $0 Cash Basis Amount of Revenue (Expense) Accrual Basis Amount of Revenue (Expense) Amount of Revenue (Expense) for May Requirements 1. Show whether each transaction would be handled as a revenue or an expense using both the cash basis and accrual basis accounting systems by completing the following table. (Expenses should be shown in parentheses.) Also, indicate the dollar amount of the revenue or expense. The May 1 transaction has been completed as an example. 2. After completing the table, calculate the amount of net income or net loss for Chef ’s Catering under the accrual basis and cash basis accounting systems for May. 3. Considering your results from Requirement 2, which method gives the best picture of the true earnings of Chef ’s Catering? Why?

What are the two rules to remember about adjusting entries?
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