A company purchased and installed equipment on January 1 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a 5-year life and no salvage value. The equipment was disposed of on July 1 of the fourth year. The company's year-end is December 31. 1. Prepare the general journal entry to update depreciation to July 1 in the fourth year. 2. Prepare the general journal entry to record the disposal of the equipment under each of these three independent situations: a. The equipment was sold for $22,000 cash. (Remember to calculate accumulated depreciation. A full year of depreciation for the first 3 years and then the partial year for the fourth year calculated above). b. The equipment was sold for $15,000 cash. (Remember accumulated depreciation) c. The equipment was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash. (Remember accumulated depreciation) GENERAL JOURNAL Date Account Titles and Explanation Debit Credit Requirement 1 July 1 Record year 4 depreciation. Show calculation below. Requirement 2 Book value at the date of disposal: Original cost Less: Accumulated depreciation Book value Requirement 2a Sold for $22,000 cash. Show calculation of gain or loss below. Requirement 2b Sold for $15,000 cash. Show calculation of gain or loss below. Requirement 2c Destroyed in fire and collected $18,000 cash from insurance. Show calculation of gain or loss below.

A company purchased and installed equipment on January 1 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a 5-year life and no salvage value. The equipment was disposed of on July 1 of the fourth year. The company's year-end is December 31. 1. Prepare the general journal entry to update depreciation to July 1 in the fourth year. 2. Prepare the general journal entry to record the disposal of the equipment under each of these three independent situations: a. The equipment was sold for $22,000 cash. (Remember to calculate accumulated depreciation. A full year of depreciation for the first 3 years and then the partial year for the fourth year calculated above). b. The equipment was sold for $15,000 cash. (Remember accumulated depreciation) c. The equipment was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash. (Remember accumulated depreciation) GENERAL JOURNAL Date Account Titles and Explanation Debit Credit Requirement 1 July 1 Record year 4 depreciation. Show calculation below. Requirement 2 Book value at the date of disposal: Original cost Less: Accumulated depreciation Book value Requirement 2a Sold for $22,000 cash. Show calculation of gain or loss below. Requirement 2b Sold for $15,000 cash. Show calculation of gain or loss below. Requirement 2c Destroyed in fire and collected $18,000 cash from insurance. Show calculation of gain or loss below.

Name: A company purchased and installed equipment on January 1 at a total co
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: A company purchased and installed equipment on January 1 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a 5-year life and no salvage value. The equipment was disposed of on July 1 of the fourth yea

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Topic Video

Question

A company purchased and installed equipment on January 1 at a total cost of $72,000.
Straight-line depreciation was calculated based on the assumption of a 5-year life and no salvage value.
The equipment was disposed of on July 1 of the fourth year. The company's year-end is December 31.

1. Prepare the general journal entry to update depreciation to July 1 in the fourth year.

2. Prepare the general journal entry to record the disposal of the equipment under each of these three independent situations:

a. The equipment was sold for $22,000 cash. (Remember to calculate accumulated depreciation. A full year of
depreciation for the first 3 years and then the partial year for the fourth year calculated above).

b. The equipment was sold for $15,000 cash. (Remember accumulated depreciation)

c. The equipment was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.
(Remember accumulated depreciation)


GENERAL JOURNAL

Date	Account Titles and Explanation	Debit	Credit
		Requirement 1
July	1

		Record year 4 depreciation. Show calculation below.



		Requirement 2
		Book value at the date of disposal:
		Original cost
		Less: Accumulated depreciation
		Book value

		Requirement 2a




		Sold for $22,000 cash. Show calculation of gain or loss below.



		Requirement 2b




		Sold for $15,000 cash. Show calculation of gain or loss below.



		Requirement 2c




		Destroyed in fire and collected $18,000 cash from insurance.
		Show calculation of gain or loss below.

Expert Solution

Step 1 Introduction

The depreciation expense is charged on fixed assets every year.

The journal entries are prepared to record sale of equipment and the excess of debit side would lead to gain on sale of equipment and excess of credit side would lead to loss on sale of equipment.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.