Question

Ace Lawn Care Module 5 Mini PracticeProblem

In June, Jim made several purchases to accommodate his growingbusiness.

June2 Jim 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 $5,000salvage value. Jim paid $2,000 down and financed the remainingpurchase price with a 5% 5 year note.

June4 Jim purchased a trailer to haul lawn care equipment for $2,300;estimated life is 5 years with no salvage value. Jim paid for thepurchase in cash.

June5 Jim purchased a gas powered trimmer for $1,200 and a commercialleaf-blower for $1,500. Jim estimates they will each have a twoyear life and no salvage value. Jim paid for both of these piecesof equipment on account.

These are in addition to the three assets Jim acquired inMay:

Date Item Cost Estimated Life Salvage Value

May 2 Truck $7,000 5 years $500

5 LawnMower $300 2 years $0

5 Aerator $500 2years $0

Depreciation was recorded in May for these assets using thestraight-line method however Jim is considering other depreciationmethods and has asked you to prepare a comparison of thestraight-line method with the double declining balance (200% DDB)method before he decides.

Instructions:

Using the chart of accounts provided below and the Exceltemplate provided with this assignment, record the transactions forthe new assets purchased in June, 2014. Start with Page7 for the journal entries. Explanations are optional.

Prepare a monthly schedule of depreciation for each of the sevenassets for 2014 using 1) straight-line and 2) 200% DDB. (Assumeassets purchased before the 15^th of the month will bedepreciated as if owned for the entire month). Remember that youare calculating monthly depreciation, not annual and adjust yourdepreciation rate. Carry your depreciation rate to four decimalsand round the depreciation expense to two decimals.

Jim has decided that equipment will be depreciated usingstraight-line and the building using 200% DDB. Prepare theadjusting journal entries for depreciation for the month of June,2014. Start with Page 8 for the adjusting journalentries. Explanations are optional.

Ace Lawn Care

Chart of Accounts

Classification	Account Number	Account Name
ASSETS	101	Cash
	110	Accounts Receivable
	112	Allowance for Doubtful Accounts
	115	Notes Receivable
	116	Interest Receivable
	120	Supplies
	130	Prepaid Insurance
	140	Inventory
	150	Equipment
	152	Land
	153	Building
	155	Accumulated Depreciation – Equipment
	156	Accumulated Depreciation - Building
LIABILITIES	201	Accounts Payable
	220	Notes Payable
	225	Interest Payable
OWNER’S EQUITY	301	Owner’s Capital
	305	Owner’s Drawings
	310	Income Summary
REVENUES	401	Lawn Service Revenue
	410	Sales Revenue
	415	Sales Returns and Allowances
	420	Interest Income
COST OF GOODS SOLD	501	Purchases
	505	Purchase Returns and Allowances
EXPENSES	620	Supplies Expense
	630	Fuel Expense
	640	Repair and Maintenance Expense
	650	Advertising Expense
	660	Insurance Expense
	670	Depreciation Expense
	680	Interest Expense
	690	Bad Debt Expense
	695	Miscellaneous Expense

Asset Information: Truck, $7,000 cost, 5 year life, $500salvage value
	Computation				End of Year
Month	Depreciable Cost	Depreciation Rate	=	Monthly Depreciation Expense	Accumulated Depreciation	Book Value
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Asset Information: Lawn Mower, $300 cost, 2 year life,$0 salvage value
	Computation				End of Year
Month	Depreciable Cost	Depreciation Rate	=	Monthly Depreciation Expense	Accumulated Depreciation	Book Value
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Asset Information: Aerator, $500 cost, 2 year life, $0salvage value
	Computation				End of Year
Month	Depreciable Cost	Depreciation Rate	=	Monthly Depreciation Expense	Accumulated Depreciation	Book Value
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Asset Information: Building, $37,000 cost, 10 year life,$5,000 salvage value
	Computation				End of Year
Month	Depreciable Cost	Depreciation Rate	=	Monthly Depreciation Expense	Accumulated Depreciation	Book Value
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Asset Information: Trailer, $2,300 cost, 5 year life, $0salvage value
	Computation				End of Year
Month	Depreciable Cost	Depreciation Rate	=	Monthly Depreciation Expense	Accumulated Depreciation	Book Value
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Asset Information: Trimmer, $1,200 cost, 2 year life, $0salvage value
	Computation				End of Year
Month	Depreciable Cost	Depreciation Rate	=	Monthly Depreciation Expense	Accumulated Depreciation	Book Value
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Asset Information: Leaf Blower, $1,500 cost, 2 yearlife, $0 salvage value
	Computation				End of Year
Month	Depreciable Cost	Depreciation Rate	=	Monthly Depreciation Expense	Accumulated Depreciation	Book Value
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14