# Accounting: Brainiac Company

Topics: Depreciation, Tax, Income Pages: 2 (374 words) Published: February 24, 2013
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
(2)
Brainiac Company
Partial Balance Sheet
December 31, 2010
Assets
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.
Instructions
(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 –...