question archive Barton Enterprises purchased equipment on January 1, 2020, at a cost of €350,000
Barton Enterprises purchased equipment on January 1, 2020, at a cost of €350,000
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Barton Enterprises purchased equipment on January 1, 2020, at a cost of €350,000. Barton uses the straight?line depreciation method, a 5?year estimated useful life, and no residual value. At the end of 2020, independent appraisers determined that the assets have a fair value of €320,000.
*Journalize entries for straight?line depreciation and revaluation
a. Prepare the journal entry to record 2020 depreciation using the straight?line method.
b. Prepare the journal entry to record the revaluation of the equipment.
c. Prepare the journal entry to record 2021 depreciation, assuming no additional revaluation.
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Answer:
Cost = 350,000
Useful life = 5 years
Annual Depreciation expense = [cost - salvage value] / useful life
= [350,000 - $0] / 5
= 70,000
Journal entry.
a) Deprecaition expense
Dec-31, 2020
Debit Depreciation expense 70,000
Credit Accumulated Depreciation 70,000
b) Revaluation of Equipment
Book value = 350,000 - 70,000 = 280,000
Fair value = 320,000
Revalaution surplus = 40,000
Dec-31, 2020
Debit Equipment 40,000
Credit Revaluation surplus 40,000
c) Deprecaition expense
= 320,000 / 4 = 80,000
Dec-31, 2021
Debit Depreciation expense 80,000
Credit Accumulated Depreciation 80,000
