Presented below are selected transactions at Ingles Company for 2014. Jan. 1: Retired a piece of machinery that was purchased on January 1, 2004. The machine cost Tk.58,000 on that date. It had a useful life of 10 years with no residual value. June 30: Sold a computer that was purchased on January 1, 2011. The computer cost Tk.40,000. It had a useful life of 5 years with no residual value. The computer was sold for Tk.14,000. Dec. 31: Discarded a delivery truck that was purchased on January 1, 2010. The truck cost Tk.33,000. It was depreciated based on a 6-year useful life with a Tk.3,000 residual value. Requirements: Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Ingles Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2013.)
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.
Presented below are selected transactions at Ingles Company for 2014.
Jan. 1: Retired a piece of machinery that was purchased on January 1, 2004. The machine
cost Tk.58,000 on that date. It had a useful life of 10 years with no residual value.
June 30: Sold a computer that was purchased on January 1, 2011. The computer cost
Tk.40,000. It had a useful life of 5 years with no residual value. The computer was sold for
Tk.14,000.
Dec. 31: Discarded a delivery truck that was purchased on January 1, 2010. The truck cost
Tk.33,000. It was
Requirements:
where applicable, on assets disposed of. Ingles Company uses straight-line depreciation.
(Assume depreciation is up to date as of December 31, 2013.)
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