Question

PA9-4 Recording Transactions and Adjustments for Tangible and Intangible Assets [LO 9-1, LO 9-2, LO 9-3, LO 9-4, LO 9-5, LO 9-6]

The following transactions and adjusting entries were completed by a paper-packaging company called Gravure Graphics International during 2015 and 2016. The company uses straight-line depreciation for trucks and other vehicles, double-declining-balance depreciation for buildings, and straight-line amortization for patents.

January	2	, 2015	Paid $88,000 cash to purchase storage shed components.
January	3	, 2015	Paid $4,000 cash to have the storage shed erected. The storage shed has an estimated life of 10 years and a residual value of $7,000.
April	1	, 2015	Paid $31,000 cash to purchase a pickup truck for use in the business. The truck has an estimated useful life of five years and a residual value of $5,000.
May	13	, 2015	Paid $300 cash for repairs to the pickup truck.
July	1	, 2015	Paid $27,000 cash to purchase patent rights on a new paper bag manufacturing process. The patent is estimated to have a remaining useful life of five years.
December	31	, 2015	Recorded depreciation and amortization on the pickup truck, storage shed, and patent.
June	30	, 2016	Sold the pickup truck for $26,000 cash. (Record the depreciation on the truck prior to recording its disposal.)
December	31	, 2016	Recorded depreciation on the storage shed. Determined that the patent was impaired and wrote off its remaining book value (i.e., wrote down the book value to zero).

Required:

Prepare the journal entries required on each of the above dates.

No	Date	General Journal	Debit	Credit
1	January 02, 2015	Buildings	88,000
1		Cash		88,000
2	January 03, 2015	Buildings	4,000
2		Cash		4,000
3	April 01, 2015	Equipment	31,000
3		Cash		31,000
4	May 13, 2015	Repairs and Maintenance Expense	300
4		Cash		300
5	July 01, 2015	Patent	27,000
5		Cash		27,000
6	December 31, 2015	Depreciation Expense
6		Amortization Expense	2,700
6		Accumulated Depreciation—Building
6		Accumulated Depreciation—Equipment
6		Accumulated Amortization—Patent		2,700
7	June 30, 2016	Depreciation Expense
7		Accumulated Depreciation—Equipment
8	June 30, 2016	Cash	26,000
8		Accumulated Depreciation—Equipment
8		Equipment		31,000
8		Gain on Disposal
9	December 31, 2016	Depreciation Expense
9		Accumulated Depreciation—Building
10	December 31, 2016	Impairment Loss
10		Patent