The following are some transactions of Sandhill Company for 2021. Sandhill Company uses straight-line depreciation and has a December 31 year end. Apr. 1 Retired a piece of equipment that was purchased on January 1, 2012, for $46,000. The equipment had an expected useful life of 10 years with no residual value. July 30 Sold equipment for $1,300 cash. The equipment was purchased on January 3, 2019, for $13,680 and was depreciated over an expected useful life of three years with no residual value. Nov. 1 Traded in an old vehicle for a new vehicle, receiving a $10,000 trade-in allowance and paying $36,000 cash. The old vehicle had been purchased on November 1, 2015, at a cost of $30,300. The estimated useful life was eight years and the estimated residual value was $6,300. The fair value of the old vehicle was $8,400 on November 1, 2021.
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.
The following are some transactions of Sandhill Company for 2021. Sandhill Company uses straight-line depreciation and has a December 31 year end.
| Apr. 1 | Retired a piece of equipment that was purchased on January 1, 2012, for $46,000. The equipment had an expected useful life of 10 years with no residual value. | |
| July 30 | Sold equipment for $1,300 cash. The equipment was purchased on January 3, 2019, for $13,680 and was |
|
| Nov. 1 |
Traded in an old vehicle for a new vehicle, receiving a $10,000 trade-in allowance and paying $36,000 cash. The old vehicle had been purchased on November 1, 2015, at a cost of $30,300. The estimated useful life was eight years and the estimated residual value was $6,300. The fair value of the old vehicle was $8,400 on November 1, 2021. |
Record the disposals. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
Apr. 1 |
|
|
|
| (To record disposal of equipment.) | |||
|
July 30 |
|||
| (To record disposal of equipment.) | |||
|
Nov. 1 |
|||
| (To record disposal of equipment.) |
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