June 30, 2020, ACME Incorporated decided to sell a storage facility that was no longer suitable for the company's operations. The following information was taken from the accounting records at January 01, 2020: Acquisition date: January 2, 2000 Acquisition cost: $800,000 Useful life: 40 years Residual value: $0 Accumulated depreciation: $400,000 Management has an authorized plan in place to sell the facility and, all criteria for classification as held for sale are met. The building's estimated fair value is $360,000 and expected sales commissions are 10% of the sales price. At December 31 (year end) the fair value was unch
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.
On June 30, 2020, ACME Incorporated decided to sell a storage facility that was no longer suitable for the company's operations. The following information was taken from the accounting records at January 01, 2020:
Acquisition date: January 2, 2000
Acquisition cost: $800,000
Useful life: 40 years
Residual value: $0
Management has an authorized plan in place to sell the facility and, all criteria for classification as held for sale are met. The building's estimated fair value is $360,000 and expected sales commissions are 10% of the sales price. At December 31 (year end) the fair value was unchanged and the sale had not been completed.
Required: (a) Prepare all required journal entries for June 30. Round final answers to the nearest dollar and show calculations below the
Step by step
Solved in 4 steps
