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Accounting: Brainiac Company

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E9-7 Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011.The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years.Actual miles driven were 15,000 in 2011 and 12,000 in 2012. Instructions

(a) Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining balance method. (b) Assume that Brainiac uses the straight-line method.

(1) Prepare the journal entry to record 2011 depreciation.
(2) Show how the truck would be reported in the December 31, 2011, balance sheet. Straight-line depreciation rate ($30,000 – $2,000) / 8 years = $3,500 per year Straight-line depreciation for 2010 $3,500

Straight-line depreciation for 2011 $3,500
Units-of-Activity depreciation rate ($30,000 – $2,000) / 100,000 miles = $.28 per mile Units-of-Activity depreciation for 2010 $4,200 (15,000 miles x $.28 per mile) Units-of-Activity depreciation for 2011 $3,360 (12,000 miles x $.28 per mile) Double declining balance depreciation rate (1 / 8) x 2 = 25% Double declining balance depreciation for 2010 $7,500 ($30,000 * 25%) Double declining balance depreciation for 2011 $5,625 [($30,000 – $7,500) x 25%] (1)

Debit Depreciation Expense $3,500
Credit Accumulated Depreciation – Delivery Truck $3,500
Brainiac Company
Partial Balance Sheet
December 31, 2010
Property, Plant and Equipment
Delivery Truck $30,000
Less Accumulated Depreciation $3,500
Book Value $26,500

E10-5 Don Walls’s gross earnings for the week were $1,780, his federal income tax withholding was $301.63, and his FICA total was $135.73.
(a) What was Walls’s net pay for the week?
(b) Journalize the entry for the recording of his pay in the general journal. (Note: Use Salaries Payable; not Cash.)
(c) Record the issuing of the check for Walls’s pay in the general journal. a. Gross – taxes = Net pay
1780 – 301.63 -135.73 = $1342.64
b. Salaries Expense1780
FICA Payable135.73
Fed. Income Tax Withholding Payable301.63
Salaries Payable1342.64
c. Salaries Payable1342.64

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