019. Swann had acquired the truck on January 1, 2015, for $42,000. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $5,000. Swann uses the straight-line method of depreciation. At December 31, 2018, the truck had a book value of $12,400. Required: 1. Prepare any necessary journal entries to record the sale o
019. Swann had acquired the truck on January 1, 2015, for $42,000. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $5,000. Swann uses the straight-line method of depreciation. At December 31, 2018, the truck had a book value of $12,400. Required: 1. Prepare any necessary journal entries to record the sale o
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Question
Swann Company sold a delivery truck on April 1, 2019. Swann had acquired the truck on January 1, 2015, for $42,000. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $5,000. Swann uses the straight-line method of depreciation. At December 31, 2018, the truck had a book value of $12,400.
Required:
| 1. | Prepare any necessary
|
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| 2. | How should the gain or loss on disposal be reported on the income statement? | ||||
| 3. | Assume that Swann uses IFRS and sold the truck for $12,000. In addition, Swann had previously recorded a revaluation surplus related to this machine of $4,000. What journal entries are required to record the sale? |
Transcribed Image Text:General Journal
Shaded cells have feedback. X
1a. Prepare the necessary journal entries on April 1, 2019 to record:
1. Depreciation expense of the delivery truck for 2019
2. The sale of the truck, assuming it sold for $12,000
General Journal Instructions
How does grading work?
PAGE 9
GENERAL JOURNAL
Score: 67/75
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
Apr. 1 Depreciation Expense
1,850.00
1
Accumulated Depreciation
1,850.00
2
Apr. 1 Cash
12,000.00
3
Accumulated Depreciation
10,550.00
4
5
Trucks
Gain on Disposal of Property, Plant, and Equipment
1,450.00
6
Points:
12.51 / 14
Feedback
v Check My Work
To account for the disposal of property, plant, and equipment, the company first records the depreciation up to the date of the disposal. It then removes the cost of the asset and the related
amount of accumulated depreciation from the respective accounts. A company recognizes a gain or a loss on the disposal for the difference between the book value of the asset (cost minus
accumulated depreciation) and the consideration received.
16. Prepare the necessary journal entries on April 1, 2019 to record:
1. Depreciation expense of the delivery truck for 2019
2. The sale of the truck, assuming it sold for $9,000
General Journal Instructions
Question not attempted.
PAGE 9
GENERAL JOURNAL
Score: 0/75
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
1
2
3
4
5
6
Transcribed Image Text:3. Assume that Swann uses IFRS and sold the truck for $12,000. In addition, Swann had previously recorded a revaluation surplus related to this machine of $4,000.
1. Depreciation expense of the delivery truck for 2019
2. The sale of the truck, assuming it sold for $12,000
3. Other adjustments related to removing the delivery truck from the books
General Journal Instructions
Question not attempted.
PAGE 9
GENERAL JOURNAL
Score: 0/100
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
1
2
4
5
8
Points:
0/ 19
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