Presented below is the trial balance for ABC Inc as of Decem

Presented below is the trial balance for ABC, Inc. as of December 31, 2008, before adjusting entries:

ABC , INC.

Trial Balance

December 31, 2008

DR

CR

Cash

$28,400

Accounts Receivable

12,500

Prepaid Insurance

7,200

Equipment

25,000

Accumulated Depreciation – Equipment

$ 800

Unearned Revenue

6,000

Notes Payable

7,950

Retained Earnings

5,000

Common Stock

29,000

Fee Revenue

39,000

Salaries Expense

13,200

Supplies Expense

950

Interest Expense

500

$ 87,750

$ 87,750

31. The Equipment was purchased on September 1, 2007. It has a useful life of ten years and an estimated salvage value of $1,000. ABC uses the straight-line method of depreciation. The adjusting entry at December 31, 2008 would include a:

a. credit to Accumulated Depreciation –Equipment for $800.

b. credit to Accumulated Depreciation –Equipment for $2,400.

c. debit to Depreciation Expense –Equipment for $800.

d. credit to Equipment for $2,400.

e. none of the above

32. Refer to the previous question. The adjusted balance in Accumulated Depreciation--Equipment on December 31, 2008, after the adjusting entry is:

33. Refer to question #31. At what amount will the Equipment be reported on the financial statements for the year ended December 31, 2008?

	DR		CR
Cash	$28,400
Accounts Receivable	12,500
Prepaid Insurance	7,200
Equipment	25,000
Accumulated Depreciation – Equipment			$ 800
Unearned Revenue			6,000
Notes Payable			7,950
Retained Earnings			5,000
Common Stock			29,000
Fee Revenue			39,000
Salaries Expense	13,200
Supplies Expense	950
Interest Expense	500
	$ 87,750		$ 87,750

Solution

31)

Journal Entry for Depreciation

Depreciation Expenses a/c Dr. 2400

To Accumulated Depreciation 2400

(To record Equipment Depreciation Expenses )

Note: Depreciation Expenses for a year = (25,000-1000)/10

= 2400

* Machine purchased in 2007, Accounting Treatment Asked for 2008.

So Answer will be option B. Credit to Accumulated Depreciation - Equipment for $2400.

32)

Accumulated Depreciation for 2007 = 800

Accumulated Depreciation for 2008 = 2,400

So Total Adjusted Balance in Accumulated Depreciation - Equipment on Dec 31, 2008 will be

(2,400 + 800 = 3,200)

Note :

Machine Puchased on Sept 1, 2007 so depreciation would be charged for 4 months only

so depreciation expense will be 2400 * 4/12 = 800 for 2007.

33) Euipment will be reported on Book Value or carrying value ( cost - Depreciation) in Financial Statements.

So Euipment\'s Carrying Value on 31st Dec,2008 will be = 25,000-(2400+800)

= 21,800 $ Answer

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