Preparing adjusting entries (annual)—depreciation LO4
Mean Beans, a local coffee shop, has the following assets onJanuary 1, 2017. Mean Beans prepares annual financial statementsand has a December 31, 2017 year-end.
On January 1, 2017, purchase equipment costing $15,000 with anestimated life of five years. Mean Beans will scrap the equipmentafter five years for $0.
On July 1, 2017, purchase furniture (tables and chairs) costing$12,000 with an estimated life of ten years. Mean Beans estimatesthat it can sell the furniture for $2,000 after ten years.
On January 1, 2015, Mean Beans had purchased a car costing $25,000with an estimated life of eight years. Mean Beans estimates that itcan sell the car for $5,000 after eight years.
Assume Mean Beans, uses Straight Line Method to depreciate theasset.
Required
For each transaction, calculate the annual depreciation expense andrecord the adjusting entry on December 31, 2017.
For the car, determine the accumulated depreciation as of December31, 2017.
For the car, determine the carrying amount as of December 31,2017.
