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Bills Lawn Care Mini Practice Part 5

June 2            Bill purchased a storage location for lawn care equipment, paid \$45,000 for a building on 1 acre.  The land is appraised at \$8,000.  The building has an estimated life of 10 years with a \$5,000 salvage value.  Bill paid \$2,000 down and financed the remaining purchase price with a 5% 5 year note.

June 4            Bill purchased a trailer to haul lawn care equipment for \$2,300; estimated life is 5 years with no salvage value.  Bill paid for the purchase in cash.

June 5            Bill purchased a gas powered trimmer for \$1,200 and a commercial leaf-blower for \$1,500.  Bill estimates they will each have a two year life and no salvage value.  Bill paid for both of these pieces of equipment on account.

These are in addition to the three assets Bill acquired in May:

Date               Item                            Cost                Estimated Life           Salvage Value

May    2          Truck                           \$5,000             5 years                       \$500

5          Lawn Mower                        \$300                2 years                       \$0

5          Aerator                      \$500                2 years                       \$0

Depreciation was recorded in May for these assets using the straight-line method however Bill is considering other depreciation methods and has asked you to prepare a comparison of the straight-line method with the double declining balance (200% DDB) method before he decides.

Instructions:

1.      Using the chart of accounts provided below and the Excel template provided with this assignment, record the transactions for the new assets purchased in June, 2014. Start with Page 7 for the journal entries.  Explanations are optional.

2.      Prepare a monthly schedule of depreciation for each of the seven assets for 2014 using 1) straight-line and 2) 200% DDB.  (Assume assets purchased before the 15th of the month will be depreciated as if owned for the entire month).  Remember that you are calculating monthly depreciation, not annual and adjust your depreciation rate.  Carry your depreciation rate to four decimals and round the depreciation expense to two decimals.

3.      Bill has decided that equipment will be depreciated using straight-line and the building using 200% DDB.  Prepare the adjusting journal entries for depreciation for the month of June, 2014. Start with Page 8 for the adjusting journal entries.  Explanations are optional.

Bills Lawn Care

Chart of Accounts

 Classification Account Number Account Name ASSETS 101 Cash 110 Accounts Receivable 112 Allowance for Doubtful Accounts 115 Notes Receivable 116 Interest Receivable 120 Supplies 130 Prepaid Insurance 140 Inventory 150 Equipment 152 Land 153 Building 155 Accumulated Depreciation – Equipment 156 Accumulated Depreciation - Building LIABILITIES 201 Accounts Payable 220 Notes Payable 225 Interest Payable OWNER’S EQUITY 301 Owner’s Capital 305 Owner’s Drawings 310 Income Summary REVENUES 401 Lawn Service Revenue 410 Sales Revenue 415 Sales Returns and Allowances 420 Interest Income COST OF GOODS SOLD 501 Purchases 505 Purchase Returns and Allowances EXPENSES 620 Supplies Expense 630 Fuel Expense 640 Repair and Maintenance Expense 650 Advertising Expense 660 Insurance Expense 670 Depreciation Expense 680 Interest Expense 690 Bad Debt Expense 695 Miscellaneous Expense

• Posted: 3 years ago
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### Bill’s Lawn Care Module 5 Mini Practice Problem

Bill’s Lawn Care Module 5 Mini Practice Problem

June 2 Bill purchased a storage location for lawn care equipment, paid …

• Not rated

### Bill’s Lawn Care Module 5 Mini Practice Problem

Bill’s Lawn Care Module 5 Mini Practice Problem

June 2 Bill purchased a storage location for lawn care equipment, paid …

• Not rated