Whitney Company purchased equipment on July 12, 2020, for $102,000. This equipment has an estimated useful life of five years and an estimated residual value of $12,000. The company depreciates this asset using the straight-line depreciation method. Required a. Compute depreciation using the following variations to the straight-line depreciation method. 1. Compute depreciation for 2020 using the exact date outstanding, commencing depreciation on July 13, 2020, and using 360 days as the allocation base. Depreciation for 2020 Answer 2. Compute full year, annual depreciation for 2020 based on the balance in the equipment account at the beginning of the period. Depreciation for 2020 Answer 3. Compute full year, annual depreciation for 2020 based on the balance in the equipment account at the end of the period.
Computing
Whitney Company purchased equipment on July 12, 2020, for $102,000. This equipment has an estimated useful life of five years and an estimated residual value of $12,000. The company depreciates this asset using the
Required
a. Compute depreciation using the following variations to the straight-line depreciation method.
1. Compute depreciation for 2020 using the exact date outstanding, commencing depreciation on July 13, 2020, and using 360 days as the allocation base.
| Depreciation for 2020 | Answer
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2. Compute full year, annual depreciation for 2020 based on the balance in the equipment account at the beginning of the period.
| Depreciation for 2020 | Answer
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3. Compute full year, annual depreciation for 2020 based on the balance in the equipment account at the end of the period.
| Depreciation for 2020 | Answer
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4. Compute depreciation for 2020 assuming one-half of a year's depreciation in both the year of purchase and the year of retirement, regardless of the date of purchase or retirement.
| Depreciation for 2020 | Answer
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5. Compute depreciation for 2020 assuming a full month of depreciation during the month of purchase and no depreciation in the month of disposal.
| Depreciation for 2020 | Answer
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b. Assume that the asset was retired on January 1, 2023.
1. Prepare the entry for disposal of the asset assuming that the company used the exact date outstanding to calculate depreciation.
| Date | Account Name | Dr. | Cr. |
|---|---|---|---|
| Jan. 1, 2023 | Loss on Retirement Property | Answer
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Answer
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| AnswerCashInventoryPropertyBuildingEquipmentAccumulated DepreciationCost of Oil ReserveRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A
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| AnswerCashInventoryPropertyBuildingEquipmentAccumulated DepreciationCost of Oil ReserveRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A
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2. Prepare the entry for disposal of the asset assuming that the company used the full year (beginning of the period) depreciation method.
| Date | Account Name | Dr. | Cr. |
|---|---|---|---|
| Jan. 1, 2023 | Loss on Retirement Property | Answer
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Answer
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| AnswerCashInventoryPropertyBuildingEquipmentAccumulated DepreciationCost of Oil ReserveRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A
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| AnswerCashInventoryPropertyBuildingEquipmentAccumulated DepreciationCost of Oil ReserveRetained Earnings—Prior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A
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