BillAc€?cs Lawn Care Mini Practice Part 5

In June, Bill made several purchases to accommodate his growing business.

June   2          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.

            4          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.

            5          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:

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.

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 15^th 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.

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.

                                                     

BILLAc€?cS LAWN CARE

CHART OF ACCOUNTS

ASSETS                                                                                    REVENUES

101      Cash                                                                           401      Lawn Service Revenue

110      Accounts Receivable                                            410      Sales Revenue

112      Allowance for Doubtful Accounts                                   415      Sales Returns and Allowances

115      Notes Receivable                                                    420      Interest Income

116      Interest Receivable            

120      Supplies                                                                     COST OF GOODS SOLD

130      Prepaid Insurance                                                   501      Purchases

140      Inventory                                                                   505      Purchase Returns and Allowances

150      Equipment                                                                

152      Land                                                                           EXPENSES

153      Building                                                                      620      Supplies Expense

155      Accumulated Depreciation Ac€?o Equipment          630      Fuel Expense

156      Accumulated Depreciation - Building                640      Repair and Maintenance Expense                                                                                                650      Advertising Expense                                   

LIABILITIES                                                                               660      Insurance Expense                         

201      Accounts Payable                                                  670      Depreciation Expense

220      Notes Payable                                                          680      Interest Expense

225      Interest Payable                                                       690      Bad Debt Expense

                                                                                               

OWNERAc€?cS EQUITY                                                                 

301      OwnerAc€?cs Capital                                                      

305      OwnerAc€?cs Drawings                                                  

310      Income Summary