Question

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

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