Store equipment is purchased on January 1, 2002 at a cost of $14,000 and $1,000 was spent on its installation. The depreciation is written-off at 10% on the original cost every year. The books are closed on December 31, every year.
Prepare a Depreciation Expense-Stores Equipment Account and an Accumulated Depreciation-Stores Equipment Account.
To prepare the Depreciation Expense-Stores Equipment Account and the Accumulated Depreciation-Stores Equipment Account, we will need to calculate the depreciation expense for each year and track the accumulated depreciation.
First, let's calculate the annual depreciation expense:
Original cost of store equipment = $14,000
Installation cost = $1,000
Total cost of store equipment = $14,000 + $1,000 = $15,000
Depreciation rate = 10%
Annual depreciation expense = Depreciation rate * Total cost of store equipment
Annual depreciation expense = 0.10 * $15,000 = $1,500
Now, let's prepare the accounts:
Depreciation Expense - Stores Equipment Account:
Date | Description | Depreciation Expense
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Dec 31, 2002 | Depreciation Expense | $1,500
Dec 31, 2003 | Depreciation Expense | $1,500
Dec 31, 2004 | Depreciation Expense | $1,500
Dec 31, 2005 | Depreciation Expense | $1,500
Accumulated Depreciation - Stores Equipment Account:
Date | Description | Accumulated Depreciation
-----------------------------------------------------------------------------
Dec 31, 2002 | Accumulated Depreciation | $1,500
Dec 31, 2003 | Accumulated Depreciation | $3,000
Dec 31, 2004 | Accumulated Depreciation | $4,500
Dec 31, 2005 | Accumulated Depreciation | $6,000
Note: In the above accounts, the Date column represents the closing date for each year, the Description column indicates the type of transaction, and the Depreciation Expense or Accumulated Depreciation column represents the respective amounts.
Remember to adjust these accounts each year on the closing date, adding the annual depreciation expense to the Depreciation Expense account and accumulating the depreciation in the Accumulated Depreciation account.