B D E F G H M N O P Q R HAPPY HOME Environmental Cleaning Task 5: At the start of Year 3, the sisters purchase property, plant, equipment, and intangible assets to ensure that HHEC.com is ready to handle the large volume of sales they expect. Throughout the HHEC year they continue to purchase property, plant, and equipment and dispose of some of their older equipment. As HHEC.com's bookkeeper, Sophia is unsure of how to record these transactions and how to calculate the annual amount of depreciation expense on these assets. Sophia provides you with a list of purchases and disposals during the year and asks you to record these transactions in the general journal. She then asks you to calculate annual depreciation expense under various depreciation methods. 1 2 3 At the end of Year 2. HHEC reported the following property, plant, and equipment 4 5 Building 150,000 6 Accumulated Depreciation - Building 15,000 135,000 7 Trucks 350,000 8 Accumulated Depreciation - Trucks 35,000 315,000 9 Land 275,000 10 Office Equipment 78.0001 11 Accumulated Depreciation - Office Equipment 7,800 70,200 12 13 Total Property, plant, and equipment 795,200 14 15 During Year 3, the following selected cash transactions occurred. Determine the appropriate Journal Entries. 16 17 January 1 Purchased land for $225,000. 18 January 1 Purchased packaging equipment for 450,000. 19 January 1 Purdhased a patent for $75,000. 20 March 1 Sold office equipment that cost 78,000 when purchased on January 1, Year 2. The equipment was sold for $75,000 21 May 1 Sold land purchased on June 1, Year 2 for 175,000. The land cost $200,000. 22 Supplemental Information: The packaging equipment that HHEC.Com purchased on January 1, Year 3 has an estimated useful life of 5 years and 23 an estimated residual value of $30,000. Calculate equipment deprecation expense for Year 3 and Year 4 under each of the following methods: Straight Line, Double Declining balance and Units of Production. The equipment is estimated to produce 150,000 units. During 24 Year 3 and Year 4, the equipment produced 25,000 and 40,000 units, respectively. The patent that HHEC.Com purchased on January 1, Year 3 has an estimated useful life of 20 years. Record the 25 Amortization expense for years 3 and 4. 26 27 ANSWER 28 Journal Entries for recordable Transactions: 29 30 Unit 2-Challenge 4-Task 5 + B D E F G H M N O P Q R S The patent that HHEC.Com purchased on January 1, Year 3 has an estimated useful life of 20 years. Record the 25 Amortization expense for years 3 and 4. 26 27 ANSWER 28 Journal Entries for recordable Transactions: 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Year 3 Year 4 45 46 Depreciation Methods: 47 48 Straight-line 49 50 51 52 Double-declining balance 53 54 55 56 Units-of-production 57 58 59 60 61 62 63 64 Unit 2-Challenge 4-Task 5
