Answered

Presented below is information related to Novak Manufacturing Corporation.

Asset Cost Estimated Salvage Estimated Life (in years)
A $46,575 $6,325 10
B 38,640 5,520 9
C 41,400 4,140 9
D 21,850 1,725 7
E 27,025 2,875 6

Required:
a. Compute the rate of depreciation per year to be applied to the plant assets under the composite method.
b. Prepare the adjusting entry necessary at the end of the year to record depreciation for the year.
c. Prepare the entry to record the sale of asset D for cash of $5,520. It was used for 6 years, and depreciation was entered under the composite method.

Answer :

Tundexi

Answer:

A. Assets  Original   Salvage Depreciable  Depreciable   SL Depreciation

                   Cost        Value       value                  Life              Per Year

       A    $46,575      6,325       40,250                   10               $4,025

       B    $38,640      5,520       33,120                    9               $3,680

       C    $41,400      4,140         37,260                   9               $4,140

       D    $21,850      1,725         20,125                   7                $2,875

       E     $27,025     2,875        24,150                   6                 $4,025

   Total   $175,490   20,585     154,905                                   $18,745

Composite rate of Depreciation = Total Depreciation per year/Total Original Cost

Composite rate of Depreciation = 18745/175490

Composite rate of Depreciation = 0.106815

Composite rate of Depreciation = 10.68%

B.   Adjusting entry                                   Debit     Credit

Depreciation Expense-Plant Asset        $18,745

Accumulated Depreciation-Plant Asset                $18,745

c. Journal Entry                                           Debit       Credit

Cash                                                            $5,520

Accumulated Depreciation-Plant Assets  $16,330

Asset D                                                                         $21,850

(Record Sale of asset D)

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