Question

A partial balance sheet is presented for Withers Industries.
• The delivery truck was purchased on June 30, 2006, and is being depreciated over four years using the straight-line method. Salvage value was estimated at $5,000.
• The office equipment was purchased on January 2, 2006, and is being depreciated over five years using the double-declining-balance method. Salvage value was estimated at $4,000.
• The factory machinery was purchased on January 2, 2005, and is being depreciated over ten years using the straight-line method. Salvage value was estimated at $8,000.
• The remaining useful life on the patent is seven years.
Required:
(a) On July 31, 2009, Withers sold the delivery truck for $9,000 cash. Prepare any necessary journal entries to record this sale.
(b) On December 1, 2009, Withers purchased land and a building for a combined cost of $400,000 by paying $100,000 cash and signing a note for the balance. An appraiser estimates the values of the building and land are, respectively, $302,500 and $247,500. Withers plans to use the building for ten years, at which time the building will probably be worth $50,000. Withers plans to use straight-line depreciation on the building. Journalize this purchase.
(c) Record all necessary depreciation and amortization entries on December 31, 2009.
(d) Prepare a partial balance sheet for Withers on December 31, 2009.
(e) How did the 2009 transactions affect Wither’s Income Statement?
(f) What are the average useful life and the average age of each category of long-term asset, with the exception of land?


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  • CreatedMarch 27, 2015
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