On Jan. 1, 2014 Zeyad Company purchased equipment at a cash price of $60,000. Related expenditures are custom 2,000 value added taxes $3,000, painting and lettering $2000, and a three-year accident insurance policy $1,500.

The useful life (productive life) of the equipment is four years.

The scrap value (salvage value or residual value) at the end of the life of the equipment is estimated 7,000.

Required:

1-Prepare the journal entry to record the amounts paid at Jan. 1, 2014.

2- Compute the annual depreciation of the equipment (use straight line method and declining balance method).

3- Prepare the journal entry to record the depreciation at Dec. 31, 2014.

4- Show the effect on the statement of income statement and statement of financial position (balance sheet) at Dec. 31, 2014.

5- complete the table.

The answer:

1. The general journal:

Date		Debit	Credit

The cost of equipment =

2. Compute the annual depreciation of the equipment (use straight line method).

The annual depreciation of the equipment=

3- Prepare the journal entry to record the depreciation at Dec. 31, 2014.

Date		Debit	Credit
Dec. 31, 2014

4- Show the effect on the statement of income statement and statement of financial position (balance sheet) at Dec. 31, 2014.

The income statement for the year ended Dec. 31, 2014

Expenses: Depreciation expense

The statement of financial position (balance sheet) as of Dec. 31, 2014

Assets
Noncurrent assets: Equipment Less: Accumulated dep. (The book value of equipment)

5- Complete the following table:

Year	Depreciation expense (income statement)	Accumulated depreciation (balance sheet)	Book value= Cost accumulated depreciation
2014
2015
2016
2017