Question
The records of Jan Ltd show that on 30 June 2019 (end of reporting period) equipment had the following balances: equipment (cost) $80,000 and accumulated
The records of Jan Ltd show that on 30 June 2019 (end of reporting period) equipment had the following balances: equipment (cost) $80,000 and accumulated depreciation $48,750. The equipment was purchased on 1 January 2017 at a cost of $80,000 with an estimated useful life of 4 years and residual value of $2,000.
On 1 January 2020, Jan Ltd decided to overhaul the equipment, replacing some parts of the equipment. The overhaul cost $20,000. The overhaul of equipment would increase the useful life of the equipment by 4 years and increase its residual value by $1,500.
The journal entries required at (i) 1 January 2020 to close (write off) accumulated depreciation on equipment, and (ii) 30 June 2020 to record depreciation expense on equipment are as follows:
Select one:
a.
(i) DR Accumulated depreciation 48,750 CR Equipment 48,750 (ii) DR Depreciation expense 9,550 CR Accumulated depreciation 9,550
b.
(i) DR Accumulated depreciation 58,500 CR Equipment 58,500 (ii) DR Depreciation expense 3,800 CR Accumulated depreciation 3,800
c.
(i) DR Depreciation expense 58,500 CR Accumulated depreciation 58,500 (ii) DR Depreciation expense 7,600 CR Accumulated depreciation 7,600
d.
(i) DR Accumulated depreciation 58,500 CR Equipment 58,500 (ii) DR Depreciation expense 7,600 CR Accumulated depreciation 7,600
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