Question
The following transactions and adjusting entries were completed by a local delivery company called Fast Delivery. The company uses straight-line depreciation for delivery vehicles, double-declining-balance
The following transactions and adjusting entries were completed by a local delivery company called Fast Delivery. The company uses straight-line depreciation for delivery vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for franchise rights. |
2015: | January | 2 | Paid $175,000 cash to purchase a small warehouse building near the airport. The building has an estimated life of 20 years and a residual value of $15,000. | |||
July | 1 | Paid $40,000 cash to purchase a delivery van. The van has an estimated useful life of five years and a residual value of $8,000. | ||||
October | 2 | Paid $500 cash to paint a small office in the warehouse building. | ||||
October | 13 | Paid $150 cash to get the oil changed in the delivery van. | ||||
December | 1 | Paid $90,000 cash to UPS to begin operating Fast Delivery business as a franchise using the name The UPS Store. This franchise right expires in five years. | ||||
December | 31 | Recorded depreciation and amortization on the delivery van, warehouse building, and franchise right. | ||||
2016: | June | 30 | Sold the warehouse building for $140,000 cash. (Record the depreciation on the building prior to recording its disposal.) | |||
December | 31 | Recorded depreciation on the delivery van and amortization on the franchise right. Determined that the franchise right was not impaired in value.
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