(a) Faster Company purchased equipment in 2010 for $104,000 and estimated an $8,000 salvage value at the end of the equipment's 10-year useful life. At December 31, 2016, there was $67,200 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31, 2017, the equipment was sold for $21,000. Indicate the accounts increased/decreased to remove the equipment from the records of Faster Company on March 31, 2017. (b) Lewis Company sold equipment for $11,000. The equipment originally cost $25,000 in 2014 and $6,000 was spent on a major overhaul in 2017 (charged to the Equipment account). Accumulated Depreciation on the equipment to the date of disposal was $20,000. Indicate the accounts increased/decreased to record the disposition of the equipment. (c) Selby Company sold equipment that had a book value of $13,500 for $15,000. The equipment originally cost $45,000 and it is estimated that it would cost $57,000 to replace the equipment. Indicate the accounts increased/decreased to record the disposition of the equipment.
(a) Faster Company purchased equipment in 2010 for $104,000 and estimated an $8,000 salvage value at the end of the equipment's 10-year useful life. At December 31, 2016, there was $67,200 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31, 2017, the equipment was sold for $21,000. Indicate the accounts increased/decreased to remove the equipment from the records of Faster Company on March 31, 2017. (b) Lewis Company sold equipment for $11,000. The equipment originally cost $25,000 in 2014 and $6,000 was spent on a major overhaul in 2017 (charged to the Equipment account). Accumulated Depreciation on the equipment to the date of disposal was $20,000. Indicate the accounts increased/decreased to record the disposition of the equipment. (c) Selby Company sold equipment that had a book value of $13,500 for $15,000. The equipment originally cost $45,000 and it is estimated that it would cost $57,000 to replace the equipment. Indicate the accounts increased/decreased to record the disposition of the equipment.
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) Faster Company purchased equipment in 2010 for $104,000
and estimated an $8,000 salvage value at the end of the
equipment's 10-year useful life. At December 31, 2016, there was
$67,200 in the Accumulated Depreciation account for this
equipment using the straight-line method of depreciation. On
March 31, 2017, the equipment was sold for $21,000.
Indicate the accounts increased/decreased to remove the
equipment from the records of Faster Company on March 31,
2017.
(b) Lewis Company sold equipment for $11,000. The equipment
originally cost $25,000 in 2014 and $6,000 was spent on a major
overhaul in 2017 (charged to the Equipment account).
Accumulated Depreciation on the equipment to the date of
disposal was $20,000.
Indicate the accounts increased/decreased to record the
disposition of the equipment.
(c) Selby Company sold equipment that had a book value of
$13,500 for $15,000. The equipment originally cost $45,000 and it
is estimated that it would cost $57,000 to replace the equipment.
Indicate the accounts increased/decreased to record the
disposition of the equipment.
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