Question

Willow Creek Company purchased and installed carpet in its new general offices on April 30 for...

Willow Creek Company purchased and installed carpet in its new general offices on April 30 for a total cost of $28,980. The carpet is estimated to have a 15-year useful life and no residual value.

A. Prepare the journal entry necessary for recording the purchase of the new carpet. Refer to the Chart of Accounts for exact wording of account titles.
B. Record the December 31 adjusting entry for the partial-year depreciation expense for the carpet, assuming that Willow Creek Company uses the straight-line method. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
Willow Creek Company
General Ledger
ASSETS
110 Cash
111 Petty Cash
112 Accounts Receivable
114 Interest Receivable
115 Notes Receivable
116 Merchandise Inventory
117 Supplies
119 Prepaid Insurance
120 Land
123 Carpet
124 Accumulated Depreciation-Carpet
125 Equipment
126 Accumulated Depreciation-Equipment
130 Mineral Rights
131 Accumulated Depletion
132 Goodwill
133 Patents
LIABILITIES
210 Accounts Payable
211 Salaries Payable
213 Sales Tax Payable
214 Interest Payable
215 Notes Payable
EQUITY
310 Owner's Capital
311 Owner's Drawing
REVENUE
410 Sales
610 Interest Revenue
620 Gain on Sale of Carpet
621 Gain on Sale of Equipment
EXPENSES
510 Cost of Merchandise Sold
520 Salaries Expense
521 Advertising Expense
522 Depreciation Expense-Carpet
523 Delivery Expense
524 Repairs and Maintenance Expense
529 Selling Expenses
531 Rent Expense
532 Depreciation Expense-Equipment
533 Depletion Expense
534 Amortization Expense-Patents
535 Insurance Expense
536 Supplies Expense
539 Miscellaneous Expense
710 Interest Expense
720 Loss on Sale of Carpet
721 Loss on Sale of Equipment

Homework Answers

Answer #1

Answer A.

Journal entry necessary for recording the purchase of the new carpet;

Date

Accounts title

Debit

Credit

30th April

Carpet

$ 28,980

-

-

Cash

-

$ 28,980

Answer B. Adjusting entry for the partial-year depreciation expense for the carpet,

Cost of carpet = $ 28,980 and salvage value = 0

Useful life of carpet = 15 years

Using straight line method:

= ( initial cost – salvage value ) / useful life

= ( 28,980 – 0 ) / 15 = $ 1932

Partial depreciation ( depreciation from 1st may to 31st December )

= $ 1932 * ( 8 / 12 ) = $ 1288

Date

Accounts title

Debit

Credit

31st December

Depreciation Expenses – carpet

$ 1288

-

-

Accumulated depreciation - carpet

-

$ 1288

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