Concept explainers
Introduction:
Asset is a term used to define a resource owned by a company against which some income will earn in near future and that income will expressed in monetary terms. Recording of an asset is done via
To determine:
Journalize the entries of the events occurred

Explanation of Solution
Journal entry will be recorded as under:
In the books of York instruments
| | | $ | $ |
01.01.2014 | Machine A/c | Dr. | 114270 | |
| To Cash A/c | Cr. | | 114270 |
| (Being asset recorded) | | | |
| | | | |
31.12.2014 | Depreciation Expense A/c | Dr. | 17425 | |
| To | Cr. | | 17425 |
| (Being Depreciation on Asset (Machine) recorded) | | | |
| | | | |
31.12.2015 | Depreciation Expense A/c | Dr. | 27500 | |
| To Accumulated Depreciation A/c | Cr. | | 27500 |
| (Being Depreciation on Asset (Machine) recorded) | | | |
| | | | |
31.12.2016 | Depreciation Expense A/c | Dr. | 27500 | |
| To Accumulated Depreciation A/c | Cr. | 27500 | |
| (Being Depreciation on Asset (Machine) recorded) | | ||
| | | ||
31.12.2016 | Cash A/c | Dr. | 25240 | |
| Loss on sale of Machine A/c | Dr. | 16605 | |
| To Machine A/c | Cr. | 41845 | |
| (Being Machine sold in cash recorded) | | ||
Explanation:
Year 2014
Given:
Cost of Asset for the year 2014 is $ 114270,
Residual value is $ 9720,
Useful life of Copy machine is 6 Years
Formula used:
For computation of cost of Machine
Cost of Machine | $ |
Original value of asset at the beginning of year | xxxx |
Add: Expenditure capitalized during the year | xxxx |
Less: Depreciation for the year | xxxx |
Asset value at the end of year | xxxx |
For calculating Depreciation under straight line method
Cost of Asset- Residual Value
Useful life of Asset
Calculation:
*Computation of Cost of Machine
Cost of Machine | $ |
Cash | 107800 |
Sales tax | 6470 |
Total | 114270 |
$ 114270- $ 9720
6
$ 104550/6
$ 17425
Year 2015
Given:
Cost of Asset for the year 2015 is $ 96845,
Residual value is $ 14345,
Useful life of machine reduced from 6 years to 4 years, as one year already passed so remaining useful life is 3 years in the year 2015
Formula used:
For computation of cost of Machine
Cost of Machine | $ |
Original value of asset at the beginning of year | xxxx |
Add: Expenditure capitalized during the year | xxxx |
Less: Depreciation for the year | xxxx |
Asset value at the end of year | xxxx |
For calculating Depreciation under straight line method
Cost of Asset- Residual Value
Useful life of Asset
Calculation:
*Computation of Cost of Machine
Cost of Machine | $ |
Asset value in the year 2014 | 114270 |
Less: Depreciation for the year 2014 | 17425 |
Asset value at the beginning of year 2015 | 96845 |
$ 96845- $ 14345
3
$ 82500/3
$ 27500
Year 2016
Given:
Cost of Asset for the year 2016 is $ 69345,
Residual value is $ 14345,
Remaining useful life of Machine is 2 years in year 2016
Formula used:
Formula for computation of cost of machine
Cost of Machine | $ |
Original value of asset at the beginning of year | xxxx |
Less: Depreciation for the year | xxxx |
Asset value at the end of year | xxxx |
For calculating Depreciation under straight line method
Cost of Asset- Residual Value
Useful life of Asset
For calculating profit or loss on sale of asset
Calculation of profit or loss on sale of asset | $ |
Original value of asset | xxxx |
Less: Depreciation for the used period | xxxx |
Asset value at the time of sale | xxxx |
Less: Sale value | xxxx |
Profit / Loss on sale of Asset | xxxx |
Calculation:
*Computation of Cost of Machine
Cost of Machine | $ |
Asset value in the year 2015 | 96845 |
Less: Depreciation for the year 2015 | 27500 |
Asset value at the beginning of year 2016 | 69345 |
$ 69345- $ 14345
2
$ 55000/2
$ 27500
*Computation of Cost of Machine at the time of sale
Cost of Machine | $ |
Truck value at the beginning of year 2016 | 69345 |
Less: Depreciation for the year 2016 | 27500 |
Truck value at the time of sale | 41845 |
Sale of Truck in Cash | 25240 |
Loss on sale of Machine ($ 41845- $ 25240) | 16605* |
*Loss on sale of truck will be recorded as expenses under Profit & Loss A/c
Events and transaction are recorded in the form of journal entries as and when it occurred.
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