The following transactions occurred during 2025. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 Mar. 10 Mar. 20 May 18 A building that cost $139,920 in 2008 is torn down to make room for a new building. The wrecking contractor was paid $5,406 and was permitted to keep all materials salvaged. Machinery that was purchased in 2018 for $16,960 is sold for $3,074 cash, f.o.b. purchaser's plant. Freight of $318 is paid on the sale of this machinery. A gear breaks on a machine that cost $9,540 in 2017. The gear is replaced at a cost of $2,120. The replacement does not extend the useful life of the machine but does make the machine more efficient. A special base installed for a machine in 2019 when the machine was purchased has to be replaced at a cost of $5,830 because of defective workmanship on the original base. The cost of the machinery was $15,052 in 2019. The

The following transactions occurred during 2025. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 Mar. 10 Mar. 20 May 18 A building that cost $139,920 in 2008 is torn down to make room for a new building. The wrecking contractor was paid $5,406 and was permitted to keep all materials salvaged. Machinery that was purchased in 2018 for $16,960 is sold for $3,074 cash, f.o.b. purchaser's plant. Freight of $318 is paid on the sale of this machinery. A gear breaks on a machine that cost $9,540 in 2017. The gear is replaced at a cost of $2,120. The replacement does not extend the useful life of the machine but does make the machine more efficient. A special base installed for a machine in 2019 when the machine was purchased has to be replaced at a cost of $5,830 because of defective workmanship on the original base. The cost of the machinery was $15,052 in 2019. The

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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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Question

The following transactions occurred during 2025. Assume that depreciation of 10% per year is charged on all machinery and 5% per
year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets
acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.
Jan. 30
Mar. 10
Mar. 20
May 18
June 23
A building that cost $139,920 in 2008 is torn down to make room for a new building. The wrecking contractor was paid
$5,406 and was permitted to keep all materials salvaged.
Date
Machinery that was purchased in 2018 for $16,960 is sold for $3,074 cash, f.o.b. purchaser's plant. Freight of $318 is
paid on the sale of this machinery.
A gear breaks on a machine that cost $9,540 in 2017. The gear is replaced at a cost of $2,120. The replacement does
not extend the useful life of the machine but does make the machine more efficient.
A special base installed for a machine in 2019 when the machine was purchased has to be replaced at a cost of
$5,830 because of defective workmanship on the original base. The cost of the machinery was $15,052 in 2019. The
cost of the base was $3,710, and this amount was charged to the Machinery account in 2019.
One of the buildings is repainted at a cost of $7,314. It had not been painted since it was constructed in 2021.
Prepare general journal entries for the transactions. (Record journal entries in the order presented in the problem. Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and
enter o for the amounts. List all debit entries before credit entries.)
Account Titles and Explanation
Debit
Credit

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