On April 1, 2019, the KB Toy Company purchased equipment to be used in its manufacturing process. The equipment cost $48,000, has an eight-year useful life, and has no residual value. The company uses the straight-line depreciation method for all manufacturing equipment. On January 4, 2021, $12,350 was spent to repair the equipment and to add a feature that increased its operating efficiency. Of the total expenditure, $2,000 represented ordinary repairs and annual maintenance and $10,350 represented the cost of the new feature. In addition to increasing operating efficiency, the total useful life of the equipment was extended to 10 years. Required: Prepare journal entries for the depreciation for 2019 and 2020. Prepare journal entries for the 2021 expenditure. Prepare journal entries for the depreciation for 2021.

Question

Janelle

Business

2 March, 01:40

On April 1, 2019, the KB Toy Company purchased equipment to be used in its manufacturing process. The equipment cost $48,000, has an eight-year useful life, and has no residual value. The company uses the straight-line depreciation method for all manufacturing equipment. On January 4, 2021, $12,350 was spent to repair the equipment and to add a feature that increased its operating efficiency. Of the total expenditure, $2,000 represented ordinary repairs and annual maintenance and $10,350 represented the cost of the new feature. In addition to increasing operating efficiency, the total useful life of the equipment was extended to 10 years. Required: Prepare journal entries for the depreciation for 2019 and 2020. Prepare journal entries for the 2021 expenditure. Prepare journal entries for the depreciation for 2021.

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Adrienne Pugh · Answer 1

Answer and. Explanation:

A. Journal entries for 2019 and 2020 depreciation. 48,000 / 8 = 6,000

2019 April through Jan. = 9/12 of year

Depreciation = 9/12 * 6,000 = 4,500

December 31, 2019

Dr Depreciation expenses $ 4,500

Cr Accumulated depreciation $4,500

December 31, 2020

Dr Depreciation expense $6,000

Cr Accumulated depreciation $6,000

B. The 2021 $12,350 expenditure

Dr Repair expense 2,000

Dr Equipment 10,350

Cr Cash 12,350

Depreciation in 2021 (with new amounts)

2019 A/D = 4,500

2020 = 6,0006000+4500 = 10,500

48,000-10,500 = 37,500 + 10,350 = 47,850

47,850 / 8.25 years

New depreciation = $5,800

December 31, 2021

Dr Depreciation expense 5,800

Cr Accumulated depreciation 5,800