Chapter 10, Problem 6BPSB

To determine

To prepare:

Journal Entries

Explanation of Solution

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Jan 1	Cash		150,000
	Cost to ready		3,510
	Cost of Operating platform		4,600
	Equipment			158,110
	(Being costs incurred to acquire equipment)

     Table (1)

• Cash is an asset which is decreased on account of payment being made to acquire the equipment hence, debit cash account.
• Cost to ready is an expense which decreases the asset hence debit sales tax account.
• Cost of Operating platform is an expense which decreases the asset hence debit sales tax account.
• Equipment is an asset which when purchased increases the value of assets of the company hence credit equipment account.

To prepare:

Journal Entries

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31	Depreciation Expense		20,000
	Accumulated Depreciation			20,000
	(Being depreciation expense recorded)

     Table (2)

• Depreciation is an expense which decreases the value of asset hence debits all expenses and losses.
• Accumulated depreciation is provisions created for depreciation of assets hence credit all incomes and gains.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31	Depreciation Expense		20,000
	Accumulated Depreciation			20,000
	(Being depreciation expense recorded)

     Table (3)

• Depreciation is an expense which decreases the value of asset hence debits all expenses and losses.
• Accumulated depreciation is provisions created for depreciation of assets hence credit all incomes and gains.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31	Cash		28,000
	Loss on sale of machinery		10,110
	Accumulated Depreciation-Machinery		120,000
	Machinery			158,110
	(Being sale of machinery recorded)

     Table (4)

• Cash is an asset which is increased on account of sale of machinery hence debit cash account.
• Loss on sale of machinery is expenses hence debit all expenses and losses.
• Accumulated depreciation is charged against value of asset hence debit accumulated depreciation account.
• Machinery is an asset which when sold decreases the value of asset hence credit machinery account.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31	Cash		52,000
	Accumulated Depreciation-Machinery		120,000
	Gain on sale of Machinery			13,890
	Machinery			158,110
	(Being sale of machinery recorded)

     Table (5)

• Cash is an asset which is increased on account of sale of machinery hence debit cash account.
• Accumulated depreciation is charged against value of asset hence debit accumulated depreciation account.
• Gain on sale of machinery is a profit hence credit all incomes and gains
• Machinery is an asset which when sold decreases the value of asset hence credit machinery account.

Date	Account Title and Explanation	Post ref	Debit($)	Credit($)
Dec 31	Cash		25,000
	Loss from fire		13,110
	Accumulated Depreciation-Machinery		120,000
	Machinery			158,110
	(Being sale of machinery recorded)

     Table (6)

• Cash is an asset which is increased on account of sale of machinery hence debit cash account.
• Loss from fire is an expense which decreases the value of asset hence debits all expenses and losses.
• Accumulated depreciation is charged against value of asset hence debit accumulated depreciation account.
• Machinery is an asset which when sold decreases the value of asset hence credit machinery account.