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Cadillac Construction Company uses the retirement method to determine depreciation on its small tools. During 2019, the first year of the company’s operations, tools were purchased at a cost of $8,000. In 2021, tools originally costing $2,000 were sold for $250 and replaced with new tools costing $2,500.Required:1. Prepare journal entries to record each of the above transactions.2. Repeat requirement 1 assuming that the company uses the replacement depreciation method instead of the retirement method.

Cadillac Construction Company uses the retirement method to determine depreciation on its small tools. During 2019, the first year of the company’s operations, tools were purchased at a cost of $8,000. In 2021, tools originally costing $2,000 were sold for $250 and replaced with new tools costing $2,500.Required:1. Prepare journal entries to record each of the above transactions.2. Repeat requirement 1 assuming that the company uses the replacement depreciation method instead of the retirement method.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cadillac Construction Company uses the retirement method to determine depreciation on its small tools. During 2019, the first year of the company’s operations, tools were purchased at a cost of $8,000. In 2021, tools originally costing $2,000 were sold for $250 and replaced with new tools costing $2,500.
Required:
1. Prepare journal entries to record each of the above transactions.
2. Repeat requirement 1 assuming that the company uses the replacement depreciation method instead of the retirement method.

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