For each of the following three Independent situations determine the gain or loss on the sale or disposal of the asset. Prepare the Journal entry required at the time of sale or disposal. Assume that all assets are depreciated using the straight-line method and in every case, a year-end of December 31. 1. Equipment purchased July 1, 20X9, for $75,000 was sold for $9,500 on June 30, 20X14. At the time of purchase, it was estimated to have a $5,000 residual value and a five-year useful life. Assume that a half-year depreciation is taken in the year the equipment was acquired and in the year it was sold. 2. Calibrating equipment was purchased on July 10, 20X13, for $120,000. At the time, it was estimated to have a six-year useful life and no residual value. On September 30, 20X14. there was a fire in the plant, and the equipment suffered water damage and is beyond repair. The company received $50,000 from the Insurance company for the equipment. Assume depreciation is applied monthly. 3. Office furniture was purchased on February 11, 20X5 for $25,000 and was estimated to have a useful life of ten years and a salvage value of $2,500. On August 1, 20X12, the company moved to new offices and donated the old furniture to charity. Assume that a half-year depreciation is taken in the year the furniture was acquired and in the year it was donated.
For each of the following three Independent situations determine the gain or loss on the sale or disposal of the asset. Prepare the Journal entry required at the time of sale or disposal. Assume that all assets are depreciated using the straight-line method and in every case, a year-end of December 31. 1. Equipment purchased July 1, 20X9, for $75,000 was sold for $9,500 on June 30, 20X14. At the time of purchase, it was estimated to have a $5,000 residual value and a five-year useful life. Assume that a half-year depreciation is taken in the year the equipment was acquired and in the year it was sold. 2. Calibrating equipment was purchased on July 10, 20X13, for $120,000. At the time, it was estimated to have a six-year useful life and no residual value. On September 30, 20X14. there was a fire in the plant, and the equipment suffered water damage and is beyond repair. The company received $50,000 from the Insurance company for the equipment. Assume depreciation is applied monthly. 3. Office furniture was purchased on February 11, 20X5 for $25,000 and was estimated to have a useful life of ten years and a salvage value of $2,500. On August 1, 20X12, the company moved to new offices and donated the old furniture to charity. Assume that a half-year depreciation is taken in the year the furniture was acquired and in the year it was donated.
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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Transcribed Image Text:For each of the following three Independent situations determine the gain or loss on the sale or disposal of the asset. Prepare the journal entry required at the time of sale or
disposal. Assume that all assets are depreciated using the straight-line method and in every case, a year-end of December 31.
1. Equipment purchased July 1, 20X9, for $75,000 was sold for $9,500 on June 30, 20X14. At the time of purchase, it was estimated to have a $5,000 residual value and a five-year
useful life. Assume that a half-year depreciation is taken in the year the equipment was acquired and in the year it was sold.
2. Calibrating equipment was purchased on July 10, 20X13, for $120,000. At the time, it was estimated to have a six-year useful life and no residual value. On September 30, 20X14,
there was a fire in the plant, and the equipment suffered water damage and is beyond repair. The company received $50,000 from the Insurance company for the equipment.
Assume depreciation is applied monthly.
3. Office furniture was purchased on February 11, 20X5 for $25,000 and was estimated to have a useful life of ten years and a salvage value of $2,500. On August 1, 20X12, the
company moved to new offices and donated the old furniture to charity. Assume that a half-year depreciation is taken in the year the furniture was acquired and in the year it was
donated.
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