Question

Manrow Growers, Inc., owns equipment for sowing and harvesting its organic fruit, vegetables, and tree nuts that are sold to local restaurants and grocery stores. At the beginning of 2016, an asset account for the company showed the following balances:

Manufacturing equipment	$	410,000
Accumulated depreciation through 2015		151,200

During 2016, the following expenditures were incurred for the equipment:

Routine maintenance and repairs on the equipment	$	5,500
Major overhaul of the equipment that improved efficiency on January 2, 2016		51,000

The equipment is being depreciated on a straight-line basis over an estimated life of 10 years with a $32,000 estimated residual value. The annual accounting period ends on December 31.

. Prepare the adjusting entry that was made at the end of 2015 for depreciation on the equipment. (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 2016, what is the remaining estimated life?

Prepare the journal entries to record the two expenditures during 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Adjusting entries :

Date	account and explanation	debit	credit
Dec 31,2015	Depreciation expense (410000-32000/10)	37800
	Accumlated depreciation-equipment		37800
	(To record depreciation)

2) Remaining life = 10-(151200/37800) = 6 years

Journal entry

Date	account and explanation	debit	credit
	Repairs and maintenance	5500
	Cash		5500
	(To record ordinary repairs)
	Equipment	51000
	Cash		51000
	(To record extra ordinary repairs)