Short Answer: (9 marks) 1) Reflecting on the 2 Schedules in this question; what method of Depreciation would you recommend to A-Cut-Above-Lawn Care to use? Use ideas, concepts, and examples to justify your answer (4 marks) 2) At the end of the year, the accountant for A-Cut-Above-Lawn Care prepares financial statements but neglects to prepare the adjustmenting entries for Depreciation on one of the company's fixed assets. a) Which accounting principle requires the Depreciation of the asset to be recorded? (1 mark) b) Explain why it is important that businesses Depreciate their Fixed Assets and Adjust their Prepaid Assets by the end of the year. Use ideas, concepts, and examples to justify your answer (4 marks) Part 1C: Depreciation (20 marks) Complete the following Depreciation Schedules for 4 full years for A-Cut-Above-Lawn Care Year a) Schedule 1. A Truck bought for $30,000 will have a useful life of 14 years. The salvage value will be $2,000 at the end of its life. Complete using straight-line method (4 marks) Year 1 Opening Book Value Depreciation Expense Accum-Depreciation Year End Book Value 30 000 2 000 2 000 28 000 Year 2 28 000 2000 4 000 26 000 Year 3 26 000 2000 6000 24 0000 Year 4 24.000 2 000 8 000 22 000 Straight line Amount ($) Purchase cost of truck 30 000 Note A Less: Residual Value 2000 B Depreciable Cost 28.000 C=A-B Life (years) 14 D Annual Depreciation 2 000 E=C/D b) Schedule 2. A Truck bought for $30,000 will have a useful life of 14 years. The salvage value will be $2,000 at the end of its life. It can be depreciated at a rate of 20%. Complete using declining-balance method (4 marks) Year Opening Book Value Depreciation Expense Accum-Depreciation Year End Book Value Year 1 30 000 6000 6 000 24 000 Year 2 24 000 4 800 10 800 19 200 Year 3 19 200 3 840 14 640 15 360 Year 4 15 360 3072 17 712 12 288 Total Cost Depreciation rate 30 000 20% c) Use the given space provided to record the appropriate Journal Entry. Journalize the Adjusting Entry for the truck at the end of the accounting period in Year 2 using Schedule 2 (3 marks) Date Account Titles & Explanation Year 2 Depreciation expense - Truck Year 2 Accumulated Depreciation - Truck Ref. Debits 512 4 800 180 4.800 Credits