Question

Prepare Journal entries

Post to t-account

Find Book value

-A non-profit purchases shuttle to drive clients to appointments on 1/119

-The buss purchased by issuing at $160,000 not payable

-It is estimated that the buss will have a life span of 4 years

-The bus is expected to run for 100,000 miles

-After the bus is done being used it will be sold foe $40,000

2a. Assume the non profit records depreciation once a year on 12/31 (straight line method)

2b. Assume the non profit records depreciation once a year on 12/31 (units of production method)

-during 2019 the nonprofit used the bus for 20,000 miles

Answer 1

1. Preparation of journal entries- straight line method

a) purchase of bus

1/19 Fixed asset-Bus   160000(Dr)

Accounts payable    160000(Cr)

b) depreciation

12/31 Depreciation   30000(Dr)

Fixed Asset - Bus 30000(cr)  

Book Value of Asset as on 12/31 = 160000-30000 =130000

Workings

Depreciation = (fixed cost- salvage value)/useful life of asset

= (160000-40000)/4

= 30000

1. Preparation of journal entries- units of production method

a) purchase of bus

1/19 Fixed asset-Bus   160000(Dr)

Accounts payable    160000(Cr)

b) depreciation

12/31 Depreciation 24000(Dr)

Fixed Asset - Bus 24000(cr)  

Book Value of Asset as on 12/31 = 160000-24000 =136000

Workings

Depreciation = (fixed cost- salvage value)/estimated production * actual production

= (160000-40000)/100000*20000

= 24000