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Chapter 10, Problem 17E
Requirement-1:
To determine
To prepare: The
Requirement-1:
Expert Solution
Answer to Problem 17E
Solution: The journal entries to record the partial year depreciation and disposal of machine are as follows:
| Journal entries | |||
| Date | Account titles | Debit | Credit |
| Jul. 1, 2019 | Depreciation Expense- Machine | $ 7,500 | |
| $ 7,500 | |||
| Jul. 1, 2019 | Cash | $ 45,500 | |
| Accumulated Depreciation- Machine | $ 67,500 | ||
| Gain on sale of Machine | $ 8,000 | ||
| Machine | $ 105,000 | ||
Explanation of Solution
Explanation:
The journal entries to record the partial year depreciation and disposal of machine are explained as follows:
| Journal entries | |||
| Date | Account titles | Debit | Credit |
| Jul. 1, 2019 | Depreciation Expense- Machine | $ 7,500 | |
| Accumulated Depreciation- Machine | $ 7,500 | ||
| (Being partial year depreciation recorded for the year 2019) | |||
| Jul. 1, 2019 | Cash | $ 45,500 | |
| Accumulated Depreciation- Machine | $ 67,500 | ||
| Gain on sale of Machine 45500-(105000-67500) | $ 8,000 | ||
| Machine | $ 105,000 | ||
| (Being machine sold for cash) | |||
Working note:
| Calculation of | |
| Cost (A) | $ 105,000 |
| Salvage Value (B) | $ - |
| Life Years (C) | 7 |
| Annual Straight Line Depreciation =(A-B)/C = | $ 15,000 |
| Number of months asset used in the year 2019 (Jan. 1 to July 1, 2019 ) | 6 |
| Depreciation for the year 2019 = 15000*6/12 = | $ 7,500 |
| Depreciation for first 4 years (2015 to 2018) = 15000*4 = | $ 60,000 |
| Accumulated depreciation balance as on July 1, 2019 = (60000+7500)= | $ 67,500 |
Conclusion
Conclusion:
Hence, the journal entries are prepared to record the partial year depreciation and disposal of the machine.
Requirement-2:
To determine
To prepare: The journal entries to record the partial year depreciation and disposal of machine on July 1, 2019, if the machine is destroyed and insurance claim received is $25,000
Requirement-2:
Expert Solution
Answer to Problem 17E
Solution: The journal entries to record the partial year depreciation and disposal of machine are as follows:
| Journal entries | |||
| Date | Account titles | Debit | Credit |
| Jul. 1, 2019 | Depreciation Expense- Machine | $ 7,500 | |
| Accumulated Depreciation- Machine | $ 7,500 | ||
| Jul. 1, 2019 | Cash | $ 25,000 | |
| Accumulated Depreciation- Machine | $ 67,500 | ||
| Loss on sale of Machine | $ 12,500 | ||
| Machine | $ 105,000 | ||
Explanation of Solution
Explanation:
The journal entries to record the partial year depreciation and disposal of machine are explained as follows:
| Journal entries | |||
| Date | Account titles | Debit | Credit |
| Jul. 1, 2019 | Depreciation Expense- Machine | $ 7,500 | |
| Accumulated Depreciation- Machine | $ 7,500 | ||
| (Being partial year depreciation recorded for the year 2019) | |||
| Jul. 1, 2019 | Cash | $ 25,000 | |
| Accumulated Depreciation- Machine | $ 67,500 | ||
| Loss on sale of Machine (105000-67500)-25,000 | $ 12,500 | ||
| Machine | $ 105,000 | ||
| (Being insurance claim received for machine destroyed in fire) | |||
Working note:
| Calculation of Straight line method depreciation: | |
| Cost (A) | $ 105,000 |
| Salvage Value (B) | $ - |
| Life Years (C) | 7 |
| Annual Straight Line Depreciation =(A-B)/C = | $ 15,000 |
| Number of months asset used in the year 2019 (Jan. 1 to July 1, 2019 ) | 6 |
| Depreciation for the year 2019 = 15000*6/12 = | $ 7,500 |
| Depreciation for first 4 years (2015 to 2018) = 15000*4 = | $ 60,000 |
| Accumulated depreciation balance as on July 1, 2019 = (60000+7500)= | $ 67,500 |
Conclusion
Conclusion:
Hence, the journal entries are prepared to record the partial year depreciation and disposal of the machine.
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Accounting for Derivatives_1.mp4; Author: DVRamanaXIMB;https://www.youtube.com/watch?v=kZky1jIiCN0;License: Standard Youtube License
Depreciation|(Concept and Methods); Author: easyCBSE commerce lectures;https://www.youtube.com/watch?v=w4lScJke6CA;License: Standard YouTube License, CC-BY