A company purchased and installed Equipment on January 1 at a total cost of $217,900. Straight-line depreciation was calculated based on the assumption of an eight- year life and $4,900 salvage value. The Equipment was disposed on December 31 of year six. The company uses the calendar year. 1. Prepare the general journal entry to update depreciation to December 31 of Year 6. (Hint: Consider how many years have passed and therefore depreciated.) 2. Prepare the general journal entry to record the sale of the machine for $36,000 cash. Prepare a table for the journal entries and show your work for partial credit.
A company purchased and installed Equipment on January 1 at a total cost of $217,900. Straight-line depreciation was calculated based on the assumption of an eight- year life and $4,900 salvage value. The Equipment was disposed on December 31 of year six. The company uses the calendar year. 1. Prepare the general journal entry to update depreciation to December 31 of Year 6. (Hint: Consider how many years have passed and therefore depreciated.) 2. Prepare the general journal entry to record the sale of the machine for $36,000 cash. Prepare a table for the journal entries and show your work for partial credit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Transcribed Image Text:A company purchased and installed Equipment on January 1 at a total cost of
$217,900.
Straight-line depreciation was calculated based on the assumption of an eight-
year life and $4,900 salvage value. The Equipment was disposed on December
31 of year six. The company uses the calendar year.
1. Prepare the general journal entry to update depreciation to December 31 of
Year 6. (Hint: Consider how many years have passed and therefore depreciated.)
2. Prepare the general journal entry to record the sale of the machine for
$36,000 cash.
Prepare a table for the journal entries and show your work for partial credit.
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