[Journal entry] The company bought office equipment for 600,000 yen, to be paid at the end of the month. It also paid an installation fee of 15,000 yen in cash. Which journal entry is correct?
Dr Equipment (備品) 600,000, Dr Fees paid (支払手数料) 15,000 / Cr Non-trade payable (未払金) 600,000, Cr Cash (現金) 15,000
The installation fee is an incidental cost needed before use, so it is included in the cost of the equipment: 615,000 yen. The unpaid 600,000 yen is not for merchandise, so it is a non-trade payable (未払金), and the fee paid in cash reduces cash. The option that debits Fees paid 15,000 is wrong because it treats the fee as an expense. The option that credits Accounts payable is wrong because accounts payable (買掛金) is only for merchandise purchases. The option that credits Non-trade payable for the full 615,000 is wrong because the fee was paid in cash, not left unpaid.
Q2 | Cost of land
[Journal entry] The company bought land for building a store for 3,000,000 yen and paid it, together with a 90,000-yen brokerage fee to the real estate agent and a 30,000-yen registration fee, from its ordinary deposit account. Which journal entry is correct?
Dr Land (土地) 3,120,000 / Cr Ordinary deposit (普通預金) 3,120,000
Dr Land (土地) 3,000,000, Dr Fees paid (支払手数料) 120,000 / Cr Ordinary deposit (普通預金) 3,120,000
Dr Land (土地) 3,000,000, Dr Fees paid (支払手数料) 90,000, Dr Taxes and dues (租税公課) 30,000 / Cr Ordinary deposit (普通預金) 3,120,000
Dr Buildings (建物) 3,120,000 / Cr Ordinary deposit (普通預金) 3,120,000
AnswerA. Dr Land (土地) 3,120,000 / Cr Ordinary deposit (普通預金) 3,120,000
The brokerage fee and the registration fee are incidental costs of acquiring the land, so both go into the cost of the land: 3,000,000 + 90,000 + 30,000 = 3,120,000 yen. The option that debits Fees paid 120,000 wrongly expenses them. The option that debits Taxes and dues 30,000 wrongly records the registration fee as taxes and dues (租税公課), which is for taxes after acquisition such as the annual fixed asset tax. The option that debits Buildings is wrong because what was bought is land, not a building, even if a store will be built on it later.
Q3 | Straight-line method, monthly proration
[Calculation] The fiscal year ends on March 31 (one-year period). On August 1 of this year, the company bought equipment for 360,000 yen and began using it at once. Using the straight-line method with a useful life of 5 years, zero residual value and monthly proration, what is this year's depreciation expense?
72,000 yen
48,000 yen
42,000 yen
54,000 yen
AnswerB. 48,000 yen
One full year is 360,000 ÷ 5 = 72,000 yen. August to March is 8 months, so 72,000 × 8/12 = 48,000 yen. 72,000 yen forgets to prorate. 42,000 yen counts 7 months and 54,000 yen counts 9 months (starting from July), both miscounts.
Q4 | Straight-line with residual value
[Calculation] A building with a cost of 6,000,000 yen was acquired at the start of the year. With a useful life of 30 years and a residual value of 10% of cost, what is one year's depreciation expense under the straight-line method?
200,000 yen
20,000 yen
162,000 yen
180,000 yen
AnswerD. 180,000 yen
The residual value is 6,000,000 × 10% = 600,000 yen, so (6,000,000 − 600,000) ÷ 30 = 180,000 yen. 200,000 yen forgets to subtract the residual value. 20,000 yen divides the residual value itself by 30. 162,000 yen subtracts 10% a second time; the residual value is deducted only once.
Q5 | Declining-balance adjusting entry
[Journal entry] At year end, the company depreciates its vehicles (cost 1,600,000 yen; accumulated depreciation before adjustment 400,000 yen) by the declining-balance method at a rate of 25%, using the indirect method. Which journal entry is correct?
The declining-balance method applies the rate to the book value: (1,600,000 − 400,000) × 25% = 300,000 yen. Under the indirect method, debit depreciation expense and credit accumulated depreciation - vehicles. 400,000 yen applies the rate to the cost, which is correct only in the first year. The option that debits accumulated depreciation and credits depreciation expense reverses the debit and credit. 100,000 yen applies the rate to the accumulated depreciation.
Q6 | Declining-balance and book value
[Calculation] Equipment was bought for 800,000 yen at the start of a year. It is depreciated at every year end by the declining-balance method at a rate of 20%. What is the book value of the equipment after depreciation at the second year end?
480,000 yen
640,000 yen
512,000 yen
288,000 yen
AnswerC. 512,000 yen
Year 1: 800,000 × 20% = 160,000 yen, leaving a book value of 640,000 yen. Year 2: 640,000 × 20% = 128,000 yen, leaving 512,000 yen. 480,000 yen applies 20% to the cost again in year 2, as if it were straight-line. 640,000 yen is the book value after year 1. 288,000 yen is the accumulated depreciation, not the book value.
Q7 | Sale at the start of the year
[Journal entry] At the start of the year, the company sold equipment (cost 500,000 yen; accumulated depreciation - equipment 300,000 yen; indirect method) for 150,000 yen, to be received at the end of the month. Which journal entry is correct?
Dr Accumulated depreciation - equipment (備品減価償却累計額) 300,000, Dr Accounts receivable (売掛金) 150,000, Dr Loss on sale of fixed assets (固定資産売却損) 50,000 / Cr Equipment (備品) 500,000
Dr Non-trade receivable (未収入金) 150,000, Dr Loss on sale of fixed assets (固定資産売却損) 350,000 / Cr Equipment (備品) 500,000
Dr Equipment (備品) 500,000 / Cr Accumulated depreciation - equipment (備品減価償却累計額) 300,000, Cr Non-trade receivable (未収入金) 150,000, Cr Gain on sale of fixed assets (固定資産売却益) 50,000
Dr Accumulated depreciation - equipment (備品減価償却累計額) 300,000, Dr Non-trade receivable (未収入金) 150,000, Dr Loss on sale of fixed assets (固定資産売却損) 50,000 / Cr Equipment (備品) 500,000
AnswerD. Dr Accumulated depreciation - equipment (備品減価償却累計額) 300,000, Dr Non-trade receivable (未収入金) 150,000, Dr Loss on sale of fixed assets (固定資産売却損) 50,000 / Cr Equipment (備品) 500,000
Book value is 500,000 − 300,000 = 200,000 yen; selling for 150,000 yen gives a 50,000-yen loss. Remove both the equipment and its accumulated depreciation, and record the uncollected price as a non-trade receivable (未収入金). The option that debits Accounts receivable wrongly uses an account meant for merchandise sales. The option with a 350,000 loss forgets to remove the accumulated depreciation and overstates the loss. The option that credits a 50,000 gain reverses debits and credits and turns the loss into a gain.
Q8 | Sale during the year
[Journal entry] The fiscal year ends on March 31. On September 30, the company sold a vehicle (cost 1,200,000 yen; accumulated depreciation at the start of the year 720,000 yen; straight-line, 5-year life, zero residual value; indirect method) for 400,000 yen, paid into its ordinary deposit account. Depreciation for this year is recorded on a monthly basis. Which journal entry is correct?
Dr Accumulated depreciation - vehicles (車両運搬具減価償却累計額) 720,000, Dr Depreciation expense (減価償却費) 120,000, Dr Ordinary deposit (普通預金) 400,000 / Cr Vehicles (車両運搬具) 1,200,000, Cr Gain on sale of fixed assets (固定資産売却益) 40,000
Dr Accumulated depreciation - vehicles (車両運搬具減価償却累計額) 720,000, Dr Ordinary deposit (普通預金) 400,000, Dr Loss on sale of fixed assets (固定資産売却損) 80,000 / Cr Vehicles (車両運搬具) 1,200,000
Dr Accumulated depreciation - vehicles (車両運搬具減価償却累計額) 720,000, Dr Depreciation expense (減価償却費) 240,000, Dr Ordinary deposit (普通預金) 400,000 / Cr Vehicles (車両運搬具) 1,200,000, Cr Gain on sale of fixed assets (固定資産売却益) 160,000
Dr Accumulated depreciation - vehicles (車両運搬具減価償却累計額) 840,000, Dr Ordinary deposit (普通預金) 400,000 / Cr Vehicles (車両運搬具) 1,200,000, Cr Gain on sale of fixed assets (固定資産売却益) 40,000
AnswerA. Dr Accumulated depreciation - vehicles (車両運搬具減価償却累計額) 720,000, Dr Depreciation expense (減価償却費) 120,000, Dr Ordinary deposit (普通預金) 400,000 / Cr Vehicles (車両運搬具) 1,200,000, Cr Gain on sale of fixed assets (固定資産売却益) 40,000
One year is 1,200,000 ÷ 5 = 240,000 yen (the opening accumulated depreciation of 720,000 yen is exactly 3 years). April to September is 6 months, so 120,000 yen of depreciation expense. Book value is 1,200,000 − 720,000 − 120,000 = 360,000 yen, so selling for 400,000 yen gives a 40,000-yen gain. The option with an 80,000-yen loss forgets this year's depreciation (it treats the book value as 480,000 yen). The option with 240,000 yen of depreciation records a full year instead of 6 months. The option that debits 840,000 of accumulated depreciation adds this year's amount to accumulated depreciation, but depreciation from the start of the year to the sale date is this year's expense.
Q9 | Gain or loss on a mid-year sale
[Calculation] The fiscal year ends on March 31. On December 31, the company sold equipment (cost 480,000 yen; accumulated depreciation at the start of the year 240,000 yen; straight-line, 4-year life, zero residual value) for 100,000 yen. Depreciation for this year is recorded monthly. What gain or loss arises from this sale?
Loss on sale of fixed assets (固定資産売却損) 140,000 yen
Loss on sale of fixed assets (固定資産売却損) 20,000 yen
Loss on sale of fixed assets (固定資産売却損) 50,000 yen
Gain on sale of fixed assets (固定資産売却益) 50,000 yen
AnswerC. Loss on sale of fixed assets (固定資産売却損) 50,000 yen
This year's depreciation is 480,000 ÷ 4 × 9/12 = 90,000 yen (April to December). Book value is 480,000 − 240,000 − 90,000 = 150,000 yen; selling for 100,000 yen gives a 50,000-yen loss. 140,000 yen forgets this year's depreciation. 20,000 yen subtracts a full year (120,000 yen). A 50,000-yen gain is wrong because the price is below book value.
Q10 | Retirement and supplies on hand
[Journal entry] At the start of the year, the company retired equipment (cost 400,000 yen; accumulated depreciation - equipment 360,000 yen; indirect method). Its estimated selling value is 15,000 yen. Which journal entry is correct?
Dr Accumulated depreciation - equipment (備品減価償却累計額) 360,000, Dr Cash (現金) 15,000, Dr Loss on retirement of fixed assets (固定資産除却損) 25,000 / Cr Equipment (備品) 400,000
Dr Accumulated depreciation - equipment (備品減価償却累計額) 360,000, Dr Supplies on hand (貯蔵品) 15,000, Dr Loss on retirement of fixed assets (固定資産除却損) 25,000 / Cr Equipment (備品) 400,000
Dr Accumulated depreciation - equipment (備品減価償却累計額) 360,000, Dr Loss on retirement of fixed assets (固定資産除却損) 40,000 / Cr Equipment (備品) 400,000
Dr Accumulated depreciation - equipment (備品減価償却累計額) 360,000, Dr Supplies on hand (貯蔵品) 15,000, Dr Loss on sale of fixed assets (固定資産売却損) 25,000 / Cr Equipment (備品) 400,000
AnswerB. Dr Accumulated depreciation - equipment (備品減価償却累計額) 360,000, Dr Supplies on hand (貯蔵品) 15,000, Dr Loss on retirement of fixed assets (固定資産除却損) 25,000 / Cr Equipment (備品) 400,000
The item has only been retired, not sold, so the estimated selling value of 15,000 yen is recorded as supplies on hand (貯蔵品), an asset. The difference from the 40,000-yen book value, 25,000 yen, is a loss on retirement. The option that debits Cash 15,000 records cash that has not been received. The option with a 40,000-yen loss on retirement ignores the 15,000 yen that can still be recovered and overstates the loss. The option that uses Loss on sale of fixed assets is wrong, because nothing was sold.
Q11 | Disposal of a declining-balance asset
[Calculation] Equipment costing 500,000 yen was acquired at the start of a year and has since been depreciated at three year ends by the declining-balance method at 40% (indirect method). At the start of the fourth year, it was disposed of with no salvage value. What is the loss on retirement of fixed assets?
108,000 yen
180,000 yen
392,000 yen
200,000 yen
AnswerA. 108,000 yen
Year 1: 200,000 yen; year 2: (500,000 − 200,000) × 40% = 120,000 yen; year 3: (500,000 − 320,000) × 40% = 72,000 yen. Accumulated depreciation is 392,000 yen and book value is 108,000 yen, all of which becomes the loss because nothing is recovered. 180,000 yen is the book value after year 2. 392,000 yen is the accumulated depreciation, not the loss. 200,000 yen is the first year's depreciation.
Q12 | Reading a fixed asset register
[Reading] The fiscal year ends on March 31; this year runs from April 1, 20X5 to March 31, 20X6. The fixed asset register (equipment; straight-line, zero residual value, indirect method) shows:<br>- Equipment A: acquired April 1, 20X2, cost 300,000 yen, 5-year life, accumulated depreciation at start of year 180,000 yen<br>- Equipment B: acquired April 1, 20X4, cost 240,000 yen, 4-year life, accumulated depreciation at start of year 60,000 yen<br>- Equipment C: acquired October 1, 20X5, cost 360,000 yen, 6-year life, accumulated depreciation at start of year 0 yen<br>After this year's depreciation (monthly basis), what is the year-end balance of accumulated depreciation - equipment (備品減価償却累計額)?
240,000 yen
420,000 yen
150,000 yen
390,000 yen
AnswerD. 390,000 yen
This year's depreciation: A 300,000 ÷ 5 = 60,000 yen; B 240,000 ÷ 4 = 60,000 yen; C 360,000 ÷ 6 × 6/12 = 30,000 yen (October to March), total 150,000 yen. Adding the opening balance of 240,000 yen (180,000 + 60,000) gives 390,000 yen. 240,000 yen is only the opening balance. 420,000 yen depreciates C for a full year. 150,000 yen is this year's expense, not the accumulated balance.
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