Mean Beans, a local coffee shop, has the following assets on January 1, 2020. Mean Beans prepares annual financial statements and has a December 31, 2020 year-end. The company’s depreciation policy is to use the straight-line method to depreciate its assets.

a. On January 1, 2020, purchase equipment costing $15,000 with an estimated life of five years. Mean Beans will scrap the equipment after five years for $0.

b. On July 1, 2020, purchase furniture (tables and chairs) costing $12,000 with an estimated life of ten years. Mean Beans estimates that it can sell the furniture for $2,000 after ten years.

c. On January 1, 2018, Mean Beans had purchased a car costing $25,000 with an estimated life of eight years. Mean Beans estimates that it can sell the car for $5,000 after eight years.

Required

1. For each transaction, calculate the annual depreciation expense and record the adjusting entry on December 31, 2020.

2. For the car, determine the accumulated depreciation as of December 31, 2020.

3. For the car, determine the carrying amount as of December 31, 2020.