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Chapter 9: 8SE (page 488)

On October 31, 2018, Alternative Landscapes discarded equipment that had a cost of \(26,920. Accumulated Depreciation as of December 31, 2017, was \)25,000. Assume annual depreciation on the equipment is $1,920. Journalize the partial-year depreciation expense and disposal of the equipment.

Short Answer

Expert verified

The loss on disposal of equipment is $320 and the required journal entries are passed.

Step by step solution

01

Computation of Gain or loss

PartialYearDepreciation=AnnualDepreciation×TimePeriod=$1,920×1012=$1,600

Gainor(loss)=MarketValueofassetreceived-Lessbookvalue-AccumulatedDepreciation=0-($26,920-$26,600)=($320)

02

Journal entry to record partial year depreciation and disposal of the equipment

Journal Entry

Date

Accounts and Explanation

Debit ($)

Credit ($)

Oct 31

Depreciation Expense- Equipment

1,600

Accumulated Depreciation- Equipment

1,600

(To record depreciation on equipment)

Oct 31

Accumulated Depreciation- Equipment

26,600

Loss on disposal of Equipment

320

Equipment

26,920

(Discarded the equipment)

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Most popular questions from this chapter

How do land improvements differ from land?

What is the depreciation method that is used for tax accounting purposes? How is it different than the methods that are required by GAAP to be used for financial accounting purposes?

What is the difference between capital expenditure and a revenue expenditure? Give an example of each.

Exchanging plant assets White Corporation purchased equipment for \(22,000. White recorded total depreciation of \)19,000 on the equipment. On January 1, 2018, White traded in the equipment for new equipment, paying \(23,200 cash. The fair market value of the new equipment is \)25,100. Journalize White Corporation’s exchange of equipment. Assume the exchange had commercial substance.

Journalizing partial-year depreciation and asset disposals and exchanges.

During 2018, Mora Corporation completed the following transactions:

Jan. 1 Traded in old office equipment with book value of \(55,000 (cost of \)127,000 and accumulated depreciation of \(72,000) for new equipment. Mora also paid \)70,000 in cash. Fair value of new equipment is \(133,000. Assume the exchange had commercial substance.

Apr. 1 Sold equipment that cost \)18,000 (accumulated depreciation of \(8,000 through December 31 of the preceding year). Mora received \)6,100 cash from the sale of the equipment. Depreciation is computed on a straightline basis. The equipment has a five-year useful life and a residual value of \(0. Dec. 31 Recorded depreciation as follows:

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Record the transactions in the journal of Mora Corporation.
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