Question

Hulme Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2020, an asset account for the company showed the following balances:

Manufacturing equipment	$	131,800
Accumulated depreciation through 2019		49,600

During 2020, the following expenditures were incurred for the equipment:

Major overhaul of the equipment on January 2, 2020, that improved efficiency	$	10,000
Routine maintenance and repairs on the equipment		1,300

The equipment is being depreciated on a straight-line basis over an estimated life of 19 years with a $14,000 estimated residual value. The annual accounting period ends on December 31.

Required:

1. Prepare the adjusting entry that was made at the end of 2019 for depreciation on the manufacturing equipment. (Do not round your intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2，Starting at the beginning of 2020, what is the remaining estimated life?

Answer 1

Calculation of depreciation under staright line = (Cost - Salvage value) / Life = (131,800 - 14,000) / 19 = $6,200

Requied 1.

Date	Particulars	Debit	Credit
Dec 31, 2019	Depreciation	6200
	Accumulated Depreciation		6200
	(To record depreciation on equipment)

Required 2

At the beginning of 2020,

Total Accumulated Deprciation = $49,600

Depreciation per year = $6200

Therefore total number of years completed = 8 years

Therefore remaining life = 19 years - 8 years = 11 years

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