(Sales with Repurchase) Cramer Corp. sells idle machinery to Enyart Company on July 1, 2017, for $40,000. Cramer agrees to repurchase this equipment from Enyart on June 30, 2018, for a price of $42,400 (an imputed interest rate of 6%).Instructions(a) Prepare the journal entry for Cramer for the transfer of the asset to Enyart on July 1, 2017.(b) Prepare any other necessary journal entries for Cramer in 2017.(c) Prepare the journal entry for Cramer when the machinery is repurchased on June 30, 2018.
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.
(Sales with Repurchase) Cramer Corp. sells idle machinery to Enyart Company on July 1, 2017, for $40,000. Cramer agrees to repurchase this equipment from Enyart on June 30, 2018, for a price of $42,400 (an imputed interest rate of 6%).
Instructions
(a) Prepare the
(b) Prepare any other necessary journal entries for Cramer in 2017.
(c) Prepare the journal entry for Cramer when the machinery is repurchased on June 30, 2018.
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