Bill’s Lawn Care Module 5 Mini Practice Problem

Bill’s Lawn Care Module 5 Mini Practice Problem
In June, Bill made several purchases to accommodate his growing business.
June 2

Bill 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 $5,000 salvage value. Bill paid $2,000 down
and financed the remaining purchase price with a 5% 5 year note.

June 4

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

June 5

Bill purchased a gas powered trimmer for $1,200 and a commercial leaf-blower
for $1,500. Bill estimates they will each have a two year life and no salvage
value. Bill paid for both of these pieces of equipment on account.
These are in addition to the three assets Bill acquired in May:
Date
May 2
5
5

Item
Truck
Lawn Mower
Aerator

Cost
$7,000
$300
$500

Estimated Life
5 years
2 years
2 years

Salvage Value
$500
$0
$0

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

Instructions:
1. Using the chart of accounts provided below and the Excel template provided with this
assignment, record the transactions for the new assets purchased in June, 2014. Start
with Page 7 for the journal entries. Explanations are optional.
2. Prepare a monthly schedule of depreciation for each of the seven assets for 2014
using 1) straight-line and 2) 200% DDB. (Assume assets purchased before the 15 th of
the month will be depreciated as if owned for the entire month). Remember that you
are calculating monthly depreciation, not annual and adjust your depreciation rate.
Carry your depreciation rate to four decimals and round the depreciation expense to
two decimals.
3. Bill has decided that equipment will be depreciated using straight-line and the
building using 200% DDB. Prepare the adjusting journal entries for depreciation for
the month of June, 2014. Start with Page 8 for the adjusting journal entries.
Explanations are optional.

Classification
ASSETS

LIABILITIES
OWNER’S EQUITY
REVENUES

COST OF GOODS SOLD
EXPENSES

Bill’s Lawn Care
Chart of Accounts
Account Number Account Name
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
201
Accounts Payable
220
Notes Payable
225
Interest Payable
301
Owner’s Capital
305
Owner’s Drawings
310
Income Summary
401
Lawn Service Revenue
410
Sales Revenue
415
Sales Returns and Allowances
420
Interest Income
501
Purchases
505
Purchase Returns and Allowances
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